Problem 11-16
		Please help - show equations & round to 3 decimals. Really struggling with these, appeciate the learning help!
	A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.9 million plus $100,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period. (See Table 4.2 for the applicable depreciation percentages.) Additional sales revenue from the renewal should amount to $1,200,000 per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 40% 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 interest, taxes, depreciation, and amortization will result from the renewal?
	b.	What net incremental net operating profits after taxes will result from the renewal?
	c.	What net incremental operating cash flows will result from the renewal?
	Solution
		Table 4.2
			Percentage by recovery year				Tax rate
		Recovery year	3 years	5 years	7 years	10 years	21%
		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%
	a.	What net incremental earnings before interest, taxes, depreciation, and amortization will result from the renewal?
		Sales Revenue
		Operating expenses and other costs
		Incremental earnings
	b.	What net incremental net operating profits after taxes will result from the renewal?
		Year			1	2	3	4	5	6
		Profits before depreciation and tax
		Depreciation
		Net profits before tax
		Tax
		Net profits after tax
	c.	What net incremental operating cash flows will result from the renewal?
		Year			1	2	3	4	5	6
		Net profits after tax
		Depreciation
		Cash Flow