3. Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following items for the first two years (in millions of dollars): Revenues Costs of goods sold and operating expenses other than depreciation Depreciation Increase in net working capital Capital expenditures Corporate tax rate Year 1 125 40 25 5 30 20% Year 2 160 60 36 8 40 20% Calculate the free cash flows for this project in the first two years. Use both methods to account for depreciation.

3. Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following items for the first two years (in millions of dollars): Revenues Costs of goods sold and operating expenses other than depreciation Depreciation Increase in net working capital Capital expenditures Corporate tax rate Year 1 125 40 25 5 30 20% Year 2 160 60 36 8 40 20% Calculate the free cash flows for this project in the first two years. Use both methods to account for depreciation.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 2P

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