Problem 9-07 A firm has earnings of $20,000 before interest, depreciation, and taxes. A new piece of equipment is installed at a cost of $5,000. The equipment will be depreciated over five years, and the firm pays 20 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 Cost Recovery Year 2 Year 5 Year 2 Year 5 Earnings before depreciation and taxes $ 20000 $ 20000. $ Depreciation expense 1000 1000 Earnings after depreciation 15000 15000 Taxes (20% tax rate) 3000 3000 Net earnings $ 12000 $ 12000 Cash flow $ 13000 . 12000 . Check My Work