You are evaluating a new product. In year 3 of your analysis, you are projecting pro forma sales of $5.6 million and cost of goods sold of $3.36 million. You will be depreciating a $2 million machine for 5 years using straight-line depreciation. Your tax rate is 38%. Finally, you expect working capital to increase from $190,000 in year 2 to $305,000 in year 3. What are your pro forma eamings for year 3? What are your pro forma free cash flows for year 3? CE Complete the following pro forma statement. (Round to the nearest dollar.) 10 Pro Forma Year 3 Sales 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 Year 2 D Revenues 123.8 167.7 COGS and Operating Expenses (other than depreciation) 34.7 58.7 Depreciation 255 31.2 Increase in Net Working Capital 3.7 7.3 Capital Expenditures 34.5 37.2 Marginal Corporate Tax Rate 35% 35% a. What are the incremental earnings for this project for years 1 and 27 (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 years 1 and 2? a. What are the incremental earnings for this project for years 1 and 27 (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) Calculate the incremental earnings of this project below. (Round to one decimal place.) Year 1 $ $ Incremental Earnings Forecast (millions) Sales Operating Expenses Depreciation EBIT Income tax at 35% $ $ $ Unlevered Net Income $ evalue