Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult toestimate, management has projected the following cash flows for the first two years (in millions of dollars):
Year 1
Year 2
Revenues
118.1
151.1
COGS and Operating expenses (other than depreciation)
45.7
47.6
Depreciation
22.2
38.3
Increase in working capital
5.5
8.6
Capital expenditures
25.8
41.8
Marginal corporate tax rate
41%
41%
a. What are the incremental earnings for this project for years 1 and 2?
The incremental earnings for year 1 is $million. (Round to one decimal place.)
b) The incremental earnings for year 2 is $million. (Round to one decimal place.)
c. What are the free cash flows for this project for the first two years?
Answers: 1
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Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash...
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