Operating cash inflows Afrms considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.95 million plus $100.000 in instalation costs The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period (see table Additional sales Tevenue from the renewal should amount to 51 18 million per year and additional operating expenses and other costs (excluding depreciation and interest) will amount to 40% of the additional sales The form is subject to a tax rate of 40% (Note Answer the following questions for each of the next 6 years) What incremental earnings before depreciation, interest and taxes will result from the renowal? b. What incrementalne operating profits after taxes will result from the renewal? c. What incremental operating cash inflows will result from the renewal? a. The incremental profits before depreciation and tax are s (Round to the nearest dollar) 10 years Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year Recovery year 3 years 5 years 7 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 11 4% Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplity calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention