* Question Completion Status QUESTION 17 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) Year2 160 60 Items Year 1 Revenues 125 Costs of Good sold and operating expenses and other 40 than depreciation Depreciation 25 36 Increase in net working capital 5 8 Capital expenditures 30 40 Marginal corporate tax rate 35% 35% a. What are the incremental earnings for this project for years 1 and 27 (2 marks) . 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 using the DFCF approach? (1.5 marks) 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? (1.5 marks) or the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). TTT Arial 3 (12pt) T.EE incremental earnings 2's ve and Submit to save and submit. Click Save All Answers to save all answers. * Question Completion Status QUESTION 17 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) Year2 160 60 Items Year 1 Revenues 125 Costs of Good sold and operating expenses and other 40 than depreciation Depreciation 25 36 Increase in net working capital 5 8 Capital expenditures 30 40 Marginal corporate tax rate 35% 35% a. What are the incremental earnings for this project for years 1 and 27 (2 marks) . 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 using the DFCF approach? (1.5 marks) 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? (1.5 marks) or the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). TTT Arial 3 (12pt) T.EE incremental earnings 2's ve and Submit to save and submit. Click Save All Answers to save all answers