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Problem 9 - 0 7 A firm has earnings of $ 1 5 , 0 0 0 before interest, depreciation, and taxes. A new piece

Problem 9-07
A firm has earnings of $15,000 before interest, depreciation, and taxes. A new piece of equipment is installed at a cost of $7,000. The equipment will be depreciated over five years, and the firm pays 15 percent of its earnings in taxes. What are the earnings and cash flows for the firm in years 2 and 5, using the two methods of depreciation? Use Exhibit 9.4 to answer the questions. Round your answers to the nearest dollar.
Modified Accelerated
Straight-line
Year 2
Earnings before depreciation and taxes
Depreciation expense
Earnings after depreciation
Taxes (15% tax rate)
Net earnings
Cash flow
Cost Recovery
Year 2
Year 5
$
$
$
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