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):

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	Year 1		Year 2
Revenues	125.5		158.1
Operating Expenses (other than depreciation)	47.7		59.6
Depreciation	22.5		25.6
Increase in Net Working Capital	2.9		7.9
Capital Expenditures	25.4		41.1
Marginal Corporate Tax Rate	21	%	21	%

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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?

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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	$		$