Transcribed Image Text
Rounded Depreciation Percentages by Recovery Year Using MACRSforFirst FourProperty ClassesPercentageby recovery year*Recovery year3years5years7years10years133%20%14%10%245%32%25%18%315%19%18%14%47%12%12%12%512%9%9%65%9%8%79%7%84%6%96%106%114%Totals100%100%100%100%Afirm is considering renewing its equipment to meet increased demandfor its product. The cost of equipment modifications is $1.81million plus $120,000 in installation costs. The firm willdepreciate the equipment modifications under? MACRS, using a?5-year recovery period Additional sales revenue from the renewalshould amount to $1.19 million per? year, and additional operatingexpenses and other costs? (excluding depreciation and? interest)will amount to 38% of the additional sales. The firm is subject toa tax rate of 40 ?(Note?: Answer the following questions for eachof the next 6? years.)a. Whatincremental earnings before? depreciation, interest, and taxes willresult from the? renewal?b. Whatincremental net operating profits after taxes will result from the?renewal?c. Whatincremental operating cash inflows will result from the?renewal?