P 9-14 (similar to) Question Help 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 1 128.8 41.9 28.7 Revenues COGS and Operating Expenses (other than depreciation) Depreciation Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Year 2 169.5 64.7 30.2 7.6 40.1 35% 3.8 31.4 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 proiect for vears 1 and 2? Incremental Earnings Forecast (millions) Year 1 Sales Operating Expenses Depreciation EBIT Income tax at 35% Unlevered Net Income