Suppose a firms tax rate is 25%. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section.
a.	What effect would a $10 million operating expense have on this years earnings? What effect would it have on next years earnings?
b.	What effect would a $10 million capital expense have on this years earnings if the capital is depreciated at a rate of $2 million per year for five years? What effect would it have on next years earnings?
	Tax rate	25%
	Life of asset (years)	5
a.	What effect would a $10 million operating expense have on this years earnings? What effect would it have on next years earnings?
		Year 1	Year 2
	Operating expense	-$10,000,000	$0
	Effect on earnings
b.	What effect would a $10 million capital expense have on this years earnings if the capital is depreciated at a rate of $2 million per year for five years? What effect would it have on next years earnings?
		Year 1	Year 2
	Capitalized expense	-$10,000,000	$0
	Annual depreciation	-$2,000,000	-$2,000,000
	Effect on earnings