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): (Click o the following icon in order to copy its contents into a spreadsheet.) Revenues COGS and Operating expenses other than depreciation Depreciation Increase in net working capital Capital expenditures Marginal corporate tax rate Year 1 115.5 42.3 28.2 3.4 29.2 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? 28% Year 2 155.7 63.7 35.7 8.5 42.5 28%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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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): (Click on
the following icon in order to copy its contents into a spreadsheet.)
Revenues
COGS and Operating expenses other than depreciation
Depreciation
Increase in net working capital
Capital expenditures
Marginal corporate tax rate
Year 1
115.5
42.3
28.2
3.4
29.2
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?
28%
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.)
Year 2
155.7
63.7
35.7
8.5
42.5
28%
Transcribed Image Text: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): (Click on the following icon in order to copy its contents into a spreadsheet.) Revenues COGS and Operating expenses other than depreciation Depreciation Increase in net working capital Capital expenditures Marginal corporate tax rate Year 1 115.5 42.3 28.2 3.4 29.2 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? 28% 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.) Year 2 155.7 63.7 35.7 8.5 42.5 28%
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