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Year 1 Year 2 Revenues 123.6 166.7 Operating Expenses (other than depreciation) 41.6 68.8 Depreciation Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate 29.8 29.7 2.3 7.9 32.9 35.2 21 % 21%

Year 1 Year 2 Revenues 123.6 166.7 Operating Expenses (other than depreciation) 41.6 68.8 Depreciation Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate 29.8 29.7 2.3 7.9 32.9 35.2 21 % 21%

Essentials Of Investments
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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please answer a and b

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): E. 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 is included as part of operating expenses.) Calculate the incremental earnings of this project below: (Round to one decimal place.) Incremental Earnings Forecast (millions) Year 1 Year 2 Sales $ Operating Expenses Depreciation ЕBIT 2$ $ Income tax at 21% $ Unlevered Net Income $ %24 %24 %24
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): E. 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 is included as part of operating expenses.) Calculate the incremental earnings of this project below: (Round to one decimal place.) Incremental Earnings Forecast (millions) Year 1 Year 2 Sales $ Operating Expenses Depreciation ЕBIT 2$ $ Income tax at 21% $ Unlevered Net Income $ %24 %24 %24
Year 1 Year 2 Revenues 123.6 166.7 68.8 Operating Expenses (other than depreciation) Depreciation Increase in Net Working Capital 41.6 29.8 29.7 2.3 7.9 Capital Expenditures 32.9 35.2 Marginal Corporate Tax Rate 21 % 21 %
Transcribed Image Text:Year 1 Year 2 Revenues 123.6 166.7 68.8 Operating Expenses (other than depreciation) Depreciation Increase in Net Working Capital 41.6 29.8 29.7 2.3 7.9 Capital Expenditures 32.9 35.2 Marginal Corporate Tax Rate 21 % 21 %
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