Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult...
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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 for the first two years (in millions of dollars): 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) Sales Operating Expenses Depreciation EBIT Income tax at 21% Unlevered Net Income Year 1 Year 2 $ EA $ $ SA $ $ FA GA 66 $ $ $ $ SA $ Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Revenues Operating Expenses (other than depreciation) Depreciation Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Print Done Year 1 Year 2 122.4 158.7 41.8 59.5 26.8 31.5 3.4 8.7 34.6 43.5 21% 21% 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. 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) Sales Operating Expenses Depreciation EBIT Income tax at 21% Unlevered Net Income Year 1 Year 2 $ EA $ $ SA $ $ FA GA 66 $ $ $ $ SA $ Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Revenues Operating Expenses (other than depreciation) Depreciation Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Print Done Year 1 Year 2 122.4 158.7 41.8 59.5 26.8 31.5 3.4 8.7 34.6 43.5 21% 21%
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