Question
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
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)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 | $ | ?? |
|
| Year 2 |
| $ | ??? |
| $ | ??? |
| $ | ??? |
| $ | ??? |
| $ | ??? |
| $ | ?? |
b. Calculate the free cash flows of this project below:(Round to one decimal place.)
| Free Cash Flow (millions) |
| Year 1 |
| Unlevered Net Income | $ | ?? |
| Depreciation | $ | ?? |
| Capital Expenditure | $ | >>? |
| Change in NWC | $ | ?? |
| Free Cash Flow | $ | ?? |
|
| Year 2 |
| $ | ?? |
| $ | ?? |
| $ | ?? |
| $ | ?? |
| $ | ?? |
O Revenues COGS and Operating Expenses (other than depreciation) Depreciation Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Year 1 127.5 47.7 25.9 2.1 31.9 35% Year 2 158.9 55.3 28.5 8.3 42.5 35%
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The 3 Signal The Investing Technique That Will Change Your Life
Authors: Jason Kelly
1st Edition
0142180955, 978-0142180952
