Etobicoke 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):Year 2RevenuesOperating Expenses (other than depreciation)CCAIncrease in Net Working CapitalCapital ExpendituresMarginal Corporate Tax RateSalesOperating ExpensesCCAEBITIncome tax at 35%Unlevered Net Income$a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.)b. What are the free cash flows for this project for the first two years?$Year 1a. Calculate the incremental earnings for Year 1 of this project below: (Round to one decimal place.)Incremental Earnings Forecast (millions)$122.733.422.73.630.335%Year 1166.652.143.28.541.735%OC

Free cash flows are cash flows that are available for investors after firm has met all operating…

Etobicoke 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): Year 2 Revenues Operating Expenses (other than depreciation) CCA Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Year 1 122.7 33.4 22.7 3.6 30.3 35% $ 166.6 52.1 43.2 8.5 41.7 35% D a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the free cash flows for this project for the first two years? a. Calculate the incremental earnings for Year 1 of this project below: (Round to one decimal place.) Incremental Earnings Forecast (millions) Year 1 Sales Operating Expenses CCA EBIT Income tax at 35% Unlevered Net Income C

Etobicoke 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): Year 2 Revenues Operating Expenses (other than depreciation) CCA Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Year 1 122.7 33.4 22.7 3.6 30.3 35% $ 166.6 52.1 43.2 8.5 41.7 35% D a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the free cash flows for this project for the first two years? a. Calculate the incremental earnings for Year 1 of this project below: (Round to one decimal place.) Incremental Earnings Forecast (millions) Year 1 Sales Operating Expenses CCA EBIT Income tax at 35% Unlevered Net Income C

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter21: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 9P

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Etobicoke 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 milions of dollars) Revenues Operating Expenses (other than depreciation) CCA Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate S Year 1 S 121.2 47.6 21.2 S 3.3 30.3 35% Year 2 a What are the incremental earnings for this project for years 1 and 27 (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the tree cash flows for this project for the first two years? O a Calculate the incremental earings for Year 1 of this project below. (Round to one decimal place.) Incremental Earnings Forecast (millions) Year 1 Sales Operating Expenses CCA EBIT Income tax at 35% Unlevered Net Income 152.7 56.2 42.9 8.1 36.6
La Falaise Rouge 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). Calculate the unlevered net income for Year 2. Revenues Costs of goods sold and operating expenses other than depreciation Depreciation Increase in networking capital Capital expenditures Marginal corporate tax rate Year 1 108 -36.6 -24.2 5.1 32.1 43% Year 2 156 -36.6 -38.6 8.9 42.5 43%
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 1 103.7 43.3 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? a. What are the incremental earnings for this project for years 1 and 2? The incremental earnings for year 1 is $ 26.1 3.9 30.4 25% million. (Round to one decimal place.) The incremental earnings for year 2 is $ b. What are the free cash flows for this project for the first two years? The free cash flow for year 1 is $ The free cash flow for year 2 is $ million.…
Etobicoke 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): Revenues Operating Expenses (other than depreciation) CCA Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Year 1 128.5 47.2 29.9 3.1 28.7 35% Year 2 155.5 63.7 34.1 8.9 41.6 35% a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the free cash flows for this project for the first two years?
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%
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 1 101.2 48.1 22.7 3.1 31.6 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? 35% Year 2 160.1 38.1 35.2 7.8 40.6 35%
Given are the following data for year 1:Revenue = $45 million; Variable cost = $10 million; Fixed cost = $5 million; Depreciation = $1 million; Interest expense = $3 million; Capital expenditure = $12 million; Change in working capital = $2 million. Corporate tax rate is 30%. Calculate the free cash flow to firm (FCFF) for year 1: a. $4.2 million b. $6.3 million c. $7.3 million d. $5.2 million
As a big firm's CFO, you must forecast the Year 1 cash flow for a proposed project with the following data. What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number. Sales revenues, each year $39, 500 Depreciation $10,000 Other operating costs $17,000 Interest expense $4,000 Tax rate 35.0%
Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars) a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the free cash flows for this project for years 1 and 2?
1.) Accounting measures of performance Consider an asset with the following cash flows: Cash flows ($ millions) Year 0 -12 1 2 3 +5.20 +4.80 +4.40 Table Summary: The heading Period spans columns 2 through 5. The firm uses straight-line depreciation. Thus, for this project, it writes off $4 million per year in years 1, 2, and 3. The discount rate is 10%. a. Show that the project's book profitability is its true profitability.
16. Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars): LOADING... . a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the free cash flows for this project for years 1 and 2? **round to one decimal**
1.) Accounting measures of performance Consider an asset with the following cash flows: Cash flows ($ millions) Year 0 -12 1 2 3 +5.20 +4.80 +4.40 Table Summary: The heading Period spans columns 2 through 5. The firm uses straight-line depreciation. Thus, for this project, it writes off $4 million per year in years 1, 2, and 3. The discount rate is 10%. a. You've just illustrated another interesting theorem. If the book rate of return is the same in each year of a project's life, the book rate of return equals the IRR. Solve.