Use the information for the question(s): A Company ABC expects that a new 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 30% 30%

a) The Earnings Before Interest and Tax (EBIT) (in first and second years) for ABC is respectively closest to?

1. 420;530

2. 340;450

3. 254;345

4. 510;595

b) The unlevered Net Income of ABC (in first and second years) is respectively closest to?

1. 357;416.5

2. 320;430

3. 230;418

4. 153;170