Buckingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC$-750.$ The cost of the XC$-750$ is $\backslash (\backslash$$ $2\mathrm{.}75\backslash )$ million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $\backslash (\backslash$$ $50,000\backslash )$ feasibility study to analyze the decision to buy the XC$-750,$ resulting in the following estimates:

Marketing: Once the XC$-750$ is operating next year, the extra capacity is expected to generate $\backslash (\backslash$$ $10\mathrm{.}0\backslash )$ million per year in additional sales, which will continue for the $10-$year life of the machine.

Operations: The disruption caused by the installation will decrease sales by $\backslash (\backslash$$ $5\backslash )$ million this year $($year $0).$ Once the machine is operating next year, the cost of goods for the products produced by the XC$-750$ is expected to be $70\backslash \%$ of their sale price. The increased production will require additional inventory on hand of $\backslash (\backslash$$ $1\mathrm{.}0\backslash )$ million, to be added in year $0$ and depleted in year $10.$

Human Resources: The expansion will require additional sales and administrative personnel at a cost of $\backslash$$$2$ million per year.

Accounting: The XC$-750$ has a CCA rate of $\backslash (45\backslash \%\backslash )$ and no salvage value is expected. The firm expects receivables from the new sales to be $\backslash (15\backslash \%\backslash )$ of revenues and payables are expected to be $\backslash (10\backslash \%\backslash )$ of the cost of goods sold. Buckingham's marginal corporate tax rate is $\backslash (35\backslash \%\backslash ).$

a$.$ Determine the incremental earnings $($using CCA$)$ from the purchase of the XC$-750.$

b$.$ Determine the free cash flow $($including all CCA tax shield effects$)$ from the purchase of the XC$-750$ for the first $10$ years. $($Hint: include the impact in year $11.)$

a$.$ Determine the incremental earnings $($using CCA$)$ from the purchase of the XC $-750$ for years $0$ to $5$ :

The incremental earnings $($including CCA$)$ for year $0$ is $\backslash (\backslash$$ $\backslash ).($Round to the nearest dollar.$)$

The incremental earnings $($including CCA$)$ for year $1$ is $\backslash (\backslash$$ $\backslash ).($Round to the nearest dollar.$)$

The incremental earnings $($including CCA$)$ for year $2$ is $\backslash$$

$.($Round to the nearest dollar.$)$

The incremental earnings $($including CCA$)$ for year $3$ is $\backslash$$

$.($Round to the nearest dollar.$)$

The incremental earnings $($including CCA$)$ for year $4$ is $\backslash$$ $.($Round to the nearest dollar.$)$

The incremental earnings $($including CCA$)$ for year $5$ is $\backslash$$

$.($Round to the nearest dollar.$)$