For Both Year 1 and 2 ^^^

For Year 1 and Year 2

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): Revenues COGS and Operating Expenses (other than depreciation) Depreciation Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Year 1 129.3 34.8 28.9 2.9 33.4 35% Year 2- 165.4 63.8 41.8 7.6 37.8 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 years 1 and 2? 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 Free Cash Flow (millions) Year 1 Unlevered Net Income Depreciation Capital Expenditure Change in NWC Free Cash Flow