PC Shopping Network may upgrade its modem pool.

It had previously upgraded 2 year ago, when it spent $115 million on equipment with an assumed life of 5 years.

The firm uses straight-line depreciation, so old equipment is going to be fully depreciated 3 years from now (at the end of the 5-year life).

It is estimated that the old equipment can still be sold for $15 million at that time (3 years from now).

The current market price for the old equipment is $80 million.

A new modem pool can be installed today for $150 million.

This will have a 3-year life and will be depreciated to zero using straight-line depreciation.

The new equipment will enable the firm to increase sales by $25 million per year and decrease operating costs by $10 million per year.

At the end of 3 years, the new equipment will be worthless.

Assume the firms tax rate is 35%.

The company is 100% equity financed and has an equity beta of 1.4. Risk free rate is 3% and the expected return on market portfolio is 8%.

Question: What are the incremental earnings in year 0, 1, 2 and 3 from now on, if the old equipment is replaced by the new one?