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This is the whole question, work it out! Elmdale Enterprises is deciding whether to...

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Finance

imageThis is the whole question, work it out!

Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars): Year 1 Year 2 158.5 62.5 26.2 Revenues COGS and Operating Expenses (other than depreciation) Depreciation Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate 128.5 41.3 22.9 3.7 31.1 35% 7.6 35.9 35% a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the free cash flows for this project for years 1 and 2? a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) Calculate the incremental earnings of this project below: (Round to one decimal place.) Incremental Earnings Forecast (millions) Year 1 Sales 128.5 41.3 Operating Expenses Depreciation 22.9 EBIT Income tax at 35% $ Unlevered Net Income

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