Etobicoke 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$).$

$($Click on the icon located on the$$ top$-$right corner of the data table below to copy its information into a$$ spreadsheet.$)$

Year $1$

Year $2$

Revenues

$127$

$170$

Cost of goods sold and Operating Expenses other than depreciation

$43$

$64$

Capital cost allowance

$20$

$37$

Increase in working capital

$5$

$8$

Capital Expenditures

$27$

$38$

Marginal Corporate Tax Rate

$35\%$

$35\%$

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.$)$

b$.$ What are the free cash flows for this project for the first two$$ years?

Question content area bottom

Part $1$

a$.$ Calculate the incremental earnings for Year $1$ of this project below.

Incremental Earnings Forecast $($millions$)$

Year $1$

Sales

$

Operating Expenses

CCA

EBIT

$

Income tax at $35\%$

Unlevered Net Income

$

$($Round the final answer to two decimal places. Round all intermediate values to two decimal places as$$ needed.$)$

Part $2$

Calculate the incremental earnings for Year $2$ of this project below.

Incremental Earnings Forecast $($millions$)$

Year $2$

Sales

$

Operating Expenses

CCA

EBIT

$

Income tax at $35\%$

Unlevered Net Income

$

$($Round the final answer to two decimal places. Round all intermediate values to two decimal places as$$ needed.$)$

Part $3$

b$.$ Calculate the free cash flows for Year $1$ of this project below.

Free Cash Flow $($millions$)$

Year $1$

CCA

$

Capital Expenditure

Change in NWC

Free Cash Flow

$

$($Round the final answer to two decimal places. Round all intermediate values to two decimal places as$$ needed.$)$

Part $4$

Calculate the free cash flows for Year $2$ of this project below.

Free Cash Flow $($millions$)$

Year $2$

CCA

$

Capital Expenditure

Change in NWC

Free Cash Flow

$

$($Round the final answer to two decimal places. Round all intermediate values to two decimal places as$$ needed.$)($Click on the icon located on the top$-$right corner of the data table below to copy its information into a spreadsheet.$)$

b$.$ What are the free cash flows for this project for the first two years?

a$.$ Calculate the incremental earnings for Year $1$ of this project below.

Unlevered Net Income

$($Round the final answer to two decimal places. Round all intermediate values to two decimal places as needed.$)$

Calculate the incremental earnings for Year $2$ of this project below.

Incremental Earnings Forecast $($millions$)$

Sales

Operating Expenses

CCA

EBIT

Year $2$

$