Question: Im doing some practice problems and im having some trouble with this one Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term

Im doing some practice problems and im having some trouble with this one

Im doing some practice problems and im having
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 Revenues 116.4 154.1 COGS and Operating expenses (other than depreciation) 47.7 39.7 Depreciation 28.5 32.5 Increase in working capital 4.1 8.5 Capital expenditures 33.8 39.5 Corporate tax rate 20% 20% a. What are the incremental earnings for this project for years 1 and 2? b. What are the free cash flows for this project for the first two years? a. What are the incremental earnings for this project for years 1 and 2? The incremental earnings for year 1 is $ 0.8 million. (Round to one decimal place.) The incremental earnings for year 2 is $ million. (Round to one decimal place.) b. What are the free cash flows for this project for the first two years? The free cash flow for year 1 is $ million. (Round to one decimal place.) The free cash flow for year 2 is $ million. (Round to one decimal place.)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!