How should you use operating costs when calculating

incremental cash flows?

Subtract taxes as though operating costs were not tax$-$deductible. Then

subtract operating costs.

Do not subtract operating costs, and then subtract taxes on operating

income before operating costs.

Subtract operating costs.

Subtract operating costs, calculate taxes off of that number, and then add

them back.

Question $2$

$2pts$

A company has new equipment costs of $$3$ million, which will be

depreciated to zero using straight$-$line depreciation over $10$ years. The

company expects to bring in revenues of $$7$ million per year for $10$

years with production costs of $$1\mathrm{.}1$ million per year. If the company's

tax rate is $22\%,$ what are the incremental earnings $($not cash flows$)$ of

this project in years $1-10?$ Enter your answer in dollars and round to

the nearest dollar.