Operating cash inflows A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $$1\mathrm{.}88$ million plus $$114,000$ 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{.}27$ million per year, and

additional operating expenses and other costs $($excluding depreciation and interest$)$ will amount to $43\%$ 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 $

$($Rol

Data table

$($Click on the icon here in order to copy the contents of the data table below into a spreadsheet.$)$

Rounded Depreciation Percentages by Recovery Year Using MACRS for

First Four Property Classes

$*$These percentages have been rounded to the nearest whole percent to simplify calculations while

retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual