Straight‑line depreciation base = 1160 over 5 years → Depreciation each year = 232.
| Year | Incremental Revenues | Incremental Costs | Depreciation | EBIT | Income Tax @ 21% | Incremental Earnings |
|---|---|---|---|---|---|---|
| 0 | 0 | -61 | 0 | -61 | 12.81 | -48.19 |
| 1 | 494 | -201 | -232 | 61 | -12.81 | 48.19 |
| 2 | 494 | -201 | -232 | 61 | -12.81 | 48.19 |
| 3 | 494 | -201 | -232 | 61 | -12.81 | 48.19 |
| 4 | 494 | -201 | -232 | 61 | -12.81 | 48.19 |
| 5 | 494 | -201 | -232 | 61 | -12.81 | 48.19 |
Step 1
Compute EBIT each year: Revenues − Costs − Depreciation.
Step 2
Compute tax: −(Tax Rate × EBIT). Here Tax Rate = 21%.
Step 3
Incremental Earnings = EBIT + Tax.