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please show the processthank you Etobicoke Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has
please show the processthank you
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 million Revenues Operating Expenses (other than depreciation) CCA Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Year 1 125.6 42.5 28.2 2.3 31.8 35% Year 2 151.1 69.6 43.7 7.3 44.3 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.) b. What are the free cash flows for this project for the first two years? Year 2 Incremental Earnings Forecast (millions) Sales $ 151.1 Operating Expenses (69.6) CCA (43.7) EBIT $ 37.8 Income tax at 35% 13.2 $ 24.6 Unlevered Net Income b. Calculate the free cash flows for Year 1 of this project below. (Round to one decimal place.) Year 1 Free Cash Flow (millions) CCA 28.2 Capital Expenditure 31.8 Change in NWC 2.3 Free Cash Flow $Step by Step Solution
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