Suppose a firm's tax rate is

35%.

a. What effect would a

$10.35

million operating expense have on this year's earnings? What effect would it have on next year's earnings?

b. What effect would

a

$10.20

million capital expense have on this year's earnings if the capital is depreciated at a rate of

$2.04

million per year for five years? What effect would it have on next year's earnings?