A and B.

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 1 124.3 35.8 28.1 Revenues COGS and Operating Expenses (other than depreciation) Depreciation Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Year 2 156.8 52.2 33.6 8.5 44.4 35% 3.5 31.4 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 $ Operating Expenses $ Depreciation $ EBIT $ Income tax at 35% $ Unlevered Net Income $ Enter any number in the edit fields and then click Check