Shepard Industries is evaluating a proposal to expand its current distribution facilities. Management has projected the project will produce the following cash flows for the first two years (in millions).

Year 1 2

Revenues 1200 1400

Operating Expense 450 525

Depreciation 240 280

Increase in working capital 60 70

Capital expenditures 300 350

Marginal corporate tax rate 21% 21%

The incremental unlevered net income of the Shepard Industries project in year two is closest to:

a.$470

b.$510

c.$600

d.$355