You have projected depreciation expense to be $1,000,000 in the next fiscal year 3 with year-end accumulated depreciation balances being $5,000,000.

If inflation in medical equipment is averaging 10 percent per year and you wish to finance only 20 percent of your replacement needs with debt, what amount of replacement reserves should you target for year-end (year 3)?

Note: the other answers in Chegg are incorrect and do not account for the (year 3) and (per year) inflation. Can someone please show me the math for those factors. Thank you.