Operating cash inflows A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $$1\mathrm{.}87$ million plus $$107,000$ in installation costs. The firm will depreciate the equipment modifications under MACRS, using a $5-$year recovery period $($see table $).$ Additional sales revenue from the renewal should amount to $$1\mathrm{.}18$ million per year, and additional operating expenses and other costs $($excluding depreciation and interest$)$ will amount to $36\%$ of the additional sales. The firm is subject to a tax rate of $21\%.($Note: Answer the following questions for each of the next $6$ years.$)$

a$.$ What net incremental earnings before depreciation, interest, and taxes will result from the renewal?

b$.$ What net incremental operating profits after taxes will result from the renewal?

c$.$ What net incremental operating cash inflows will result from the renewal?

a$.$ The net incremental profits before depreciation and tax are $

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Data table

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Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes

Percentage by recovery year ${?}^{**}$

$\backslash$table$[[$Recovery year,$3$ years,Percentage by recovery year,$],[1,33\%,5$ years,$7$ years$],[2,45\%,20\%,14\%$