Nokela Industries purchases a $43.2 million cyclo-converter. The cyclo-converter will be depreciated by $10.8 million per year over four years, starting this year. Suppose Nekelas tax rate is 40%.
a. What impact will the cost of the purchase have on earnings foreach of the four years? (increase or decrease and by how much)
b. What impact will the cost of the purchase have on the firms cash flow in year 1?(_____ million)
Year 2 of the four? (______ million)
Please show how you came up with the answers.