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? G 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.)
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? G 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.)
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
Section: Chapter Questions
Problem 1PS
Related questions
Question
|
Year 1
|
Year 2
|
||
Revenues
|
123.3
|
|
166.9
|
|
Operating Expenses (other than
|
44.6
|
|
67.2
|
|
Depreciation
|
28.9
|
|
43.4
|
|
Increase in Net Working Capital
|
2.9
|
|
8.8
|
|
Capital Expenditures
|
26.4
|
|
43.4
|
|
Marginal Corporate Tax Rate
|
21
|
%
|
21
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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):
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?
a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold
Calculate the incremental earnings of this project below:
Incremental Earnings Forecast (millions)
Sales
Operating Expenses
Depreciation
EBIT
Income tax at 21%
Unlevered Net Income
(Round to one decimal place.)
Year 1
Year 2
$
$
$
$
$
$
$
$
$
$
$
$
-C
included as part of operating expenses.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffd01fce5-4ed6-4e8f-912c-c98978122cab%2F223919b0-13be-46ed-ba2e-72a666d1bca8%2Fq3baxd_processed.png&w=3840&q=75)
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):
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?
a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold
Calculate the incremental earnings of this project below:
Incremental Earnings Forecast (millions)
Sales
Operating Expenses
Depreciation
EBIT
Income tax at 21%
Unlevered Net Income
(Round to one decimal place.)
Year 1
Year 2
$
$
$
$
$
$
$
$
$
$
$
$
-C
included as part of operating expenses.)
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