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): LOADING....

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.)

. What are the free cash flows for this project for years 1 and 2? Question content area bottom

Part 1 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 Year 2 Sales $ $ Operating Expenses $ $ Depreciation $ $ EBIT $ $ Income tax at 21% $ $ Unlevered Net Income

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):

LOADING...

.

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?

Question content area bottom

Part 1

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		Year 2
Sales	$		$
Operating Expenses	$		$
Depreciation	$		$
EBIT	$		$
Income tax at 21%	$		$
Unlevered Net Income

Year 1 Year 2 Revenues 124.5 154.5 Operating Expenses (other than depreciation) 40.7 53.3 Depreciation 20.7 34.4 Increase in Net Working Capital 3.5 8.2 Capital Expenditures 33.4 35.9 Marginal Corporate Tax Rate (%) 21 21