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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

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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 forthe first two years (in millions of dollars): Year 1 Year 2 168.5 Revenues 123,6 COGS and operating Expenses (other than depreciation) 41.9 56.5 25.3 35.9 Depreciation 3.9 Increase in Net Working Capital 8.3 32.1 41.9 Capital Expenditures Marginal Corporate Tax Rate 35% 35% a. What are the incremental earnings for this project for years 1and 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 Year 2 Sales Operating Expenses s Depreciation EBIT Income tax at 35% Unlevered Net Income

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