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 y of dollars) Revenues Operating Expenses (other than depreciation) CCA Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Year 1 Operating Expenses CCA EBIT Income tex at 35% Unlevered Net Income 121.2 47.6 21.2 3.3 30.3 35% S Year 2 D 152.7 56.2 42.9 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? 8.1 36.6 35% a Calculate the incremental earnings for Year 1 of this project below: (Round to one decimal place.) Year 1 incremental Earnings Forecast (millions)

Project Cash Flow The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service: Projected sales $24 million Operating costs (not including depreciation) $13 million Depreciation $5 million Interest expense $4 million The company faces a 25% tax rate. What is the project's operating cash flow for the first year (t = 1)? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Round your answer to the nearest dollar. $

Project Cash Flow The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service: Projected sales Operating costs (not including depreciation) Depreciation Interest expense 250 $22 million $7 million $4 million $4 million

Cashflow patterns and the modified rate of return calculation Locke Manufacturing Inc. is analyzing a project with the following projected cash flows: Year Cash Flow 0 -$1,324,800 1 300,000 2 450,000 3 546,000 4 360,000   This project exhibits_________ (pick one- conventional or unconventional) cash flows.   Locke’s desired rate of return is 5.00%. Given the cash flows expected from the company's new project, compute the project’s anticipated modified internal rate of return (MIRR). (Hint: Round all dollar amounts to the nearest whole dollar, and your final MIRR value to two decimal places.) choose the correct choice 6.09%   6.47%   6.85%   7.61%     Locke’s managers are generally conservative, and select projects based solely on the project’s modified internal rate of return (MIRR). Should the company’s managers accept this independent project? choose the correct choice. Yes   No     You’ve just learned that…