See Table 2.5

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showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for

$12

million at the end of

2016,

and this equipment was depreciated by

$4

million per year in

2017,

2018,

and

2019.

Given Mydeco's tax rate of

35%,

what impact would this additional purchase have had on Mydeco's net income in years

2016-2019?

(Assume the equipment is paid for out of cash and that Mydeco earns no interest on its cash balances.)

Income Statement	2015	2016	2017	2018	2019
Revenue	404.3	363.8	424.6	510.7	604.1
Cost of Goods Sold	(188.3)	(173.8)	(206.2)	(246.8)	(293.4)
Gross Profit	216	190	218.4	263.9	310.7
Sales and Marketing	(66.7)	(66.4)	(82.8)	(102.1)	(120.8)
Administration	(60.6)	(59.1)	(59.4)	(66.4)	(78.5)
Depreciation & Amortization	(27.3)	(27.0)	(34.3)	(38.4)	(38.6)
EBIT	61.4	37.5	41.9	57	72.8
Interest Income (Expense)	(33.7)	(32.9)	(32.2)	(37.4)	(39.4)
Pretax Income	27.7	4.6	9.7	19.6	33.4
Income Tax	(9.7)	(1.6)	(3.4)	(6.9)	(11.7)
Net Income	18	3	6.3	12.7	21.7
Shares outstanding (millions)	55	55	55	55	55
Earnings per share	$0.33	$0.05	$0.11	$0.23	$0.39
Balance Sheet	2015	2016	2017	2018	2019
Assets
Cash	48.8	68.9	86.3	77.5	85
Accounts Receivable	88.6	69.8	69.8	76.9	86.1
Inventory	33.7	30.9	28.4	31.7	35.3
Total Current Assets	171.1	169.6	184.5	186.1	206.4
Net Property, Plant & Equip.	245.3	243.3	309	345.6	347
Goodwill & Intangibles	361.7	361.7	361.7	361.7	361.7
Total Assets	778.1	774.6	855.2	893.4	915.1
Liabilities & Stockholders' Equity
Accounts Payable	18.7	17.9	22	26.8	31.7
Accrued Compensation	6.7	6.4	7	8.1	9.7
Total Current Liabilities	25.4	24.3	29	34.9	41.4
Long-term Debt	500	500	575	600	600
Total Liabilities	525.4	524.3	604	634.9	641.4
Stockholders' Equity	252.7	250.3	251.2	258.5	273.7
Total Liabilities & Stockholders' Equity	778.1	774.6	855.2	893.4	915.1
Statement of Cash Flows	2015	2016	2017	2018	2019
Net Income	18	3	6.3	12.7	21.7
Depreciation & Amortization	27.3	27	34.3	38.4	38.6
Chg. in Accounts Receivable	3.9	18.8	0	(7.1)	(9.2)
Chg. in Inventory	(2.9)	2.8	2.5	(3.3)	(3.6)
Chg. in Pay. & Accrued Comp.	2.2	(1.1)	4.7	5.9	6.5
Cash from Operations	48.5	50.5	47.8	46.6	54
Capital Expenditures	(25.0)	(25.0)	(100.0)	(75.0)	(40.0)
Cash from Investing Activ.	(25.0)	(25.0)	(100.0)	(75.0)	(40.0)
Dividends Paid	(5.4)	(5.4)	(5.4)	(5.4)	(6.5)
Sale (or purchase) of stock	-	-	-	-	-
Debt Issuance (Pay Down)	-	-	75	25	-
Cash from Financing Activ.	(5.4)	(5.4)	69.6	19.6	(6.5)
Change in Cash	18.1	20.1	17.4	(8.8)	7.5
Mydeco Stock Price	$7.92	$3.30	$5.25	$8.71	$10.89