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
Revenues	121.4		156.6
Operating Expenses (other than depreciation)	35.7		61.8
Depreciation	29.2		27.5
Increase in Net Working Capital	3.3		7.7
Capital Expenditures	28.3		35.9
Marginal Corporate Tax Rate	21	%	21	%

.

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