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**
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**
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
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Question
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**
Transcribed Image Text:Twitte expenses.)
b. What are
ley®
% Off A
a. What are
expenses.)
Digest f
Calculate th
Increm
Series C
Sales
tion - TH
Operati
Deprec
New on
EBIT
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Year 1
Revenues
126.7
48.1
Operating Expenses (other than depreciation)
Depreciation
20.5
Increase in Net Working Capital
2.3
Capital Expenditures
29.3
Marginal Corporate Tax Rate
21%
4
Year 2
162.3
59.2
36.3
7.6
42.5
21%
- X
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
at 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
20 expenses.)
b. What are the free cash flows for this project for years 1 and 2?
Pha
BEEED
r 5
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.)
Zza
Calculate the incremental earnings of this project below: (Round to one decimal place.)
Incremental Earnings Forecast (millions)
0518
Year 1
Year 2
Sales
$
$
log
Operating Expenses
$
$
Depreciation
$
$
SI-E
EBIT
$
$
All P
Income tax at 21%
$
$
Unlevered Net Income
$
$
for 4
b. What are the free cash flows for this project for years 1 and 2?
Gasli
Calculate the free cash flows of this project below: (Round to one decimal place.)
Free Cash Flow (millions)
Year 1
Year 2
Thank
Unlevered Net Income
$
n HBO
Depreciation
$
$
Capital Expenditure
$
initia
Change in NWC
s with
Free Cash Flow
Rom
S
$
$
$
$
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pur communit
your account u
Change Order
bunt you
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RUNNING OUT GE
t your comm
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962085 Estimated
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