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):

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?

Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are Year 2 163.7 Revenues COGS and Operating Expenses (other than depreciation) Depreciation Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Year 1 122.1 40.4 24.5 22 63.6 30.2 7.2 44.9 35% 33.6 35% a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of b. What are the free cash flows for this project for years 1 and 2? 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