Use the information for the question(s) below.

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 30% 30%

1) The incremental EBIT for the Shepard Industries project in year one is closest to:

A) $360

B) $750

C) $595

D) $510

2) The incremental EBIT for the Shepard Industries project in year two is closest to:

A) $415

B) $875

C) $595

D) $510