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):
.
Year 1 | Year 2 | |||
Revenues | 127.4 | 150.8 | ||
Operating Expenses (other than depreciation) | 35.1 | 56.9 | ||
Depreciation | 22.5 | 29.1 | ||
Increase in Net Working Capital | 2.6 | 7.1 | ||
Capital Expenditures | 34.9 | 43.4 | ||
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) |
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