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 2D CoGS and Operating Expenses (other than depreciation) Depreciation Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate 123.4 31.9 22.9 2.5 29.2 35% 150.2 54.3 39.8 7.9 35.3 35% 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.) Year 1 Year 2 Incremental Earnings Forecast (millions) Sales Operating Expenses Depreciation EBIT Income tax at 35% Unlevered Net Income 128.4 S (31.2) S (28.6) S 68.6 S (24.0) S 44.6 S 151.8 (60.2) (36.9) 54.7 35.6 b. What aetheee cash flows for this project for years 1 and 2? Calculate the free cash flows of this project below (Round to one decimal place.) Year 1 Year 2 Free Cash Flow (millions) Unlevered Net Income Depreciation Capital Expenditure Change in NWC Free Cash Flow 44.6 S 28.6 S (31.3) S (3.9) S 38.0 S 35.6 36.9 (44.3) (8.8) 19.4