Question: Need the answer for A B C D. XYZ Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to
Need the answer for A B C D.
XYZ 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): 160 Items Year1 Year2 Revenues 125 Costs of Good sold and operating expenses and other than depreciation Depreciation Increase in net working capital Capital expenditures 30 Marginal corporate tax rate 35% 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? c. If the initial investment of the project is 10 thousand dollars and the cost of capital for this project is 15%, what is your estimate of the value of the new project? d. If XYZ has a debt of 5 thousand dollars and its number of shares outstanding is 2 thousand shares, what is the price of its stock? 35%
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