Question

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): Year 1 118.1 46.9 28.7 Revenues COGS and Operating expenses (other than depreciation) Depreciation Increase in working capital Capital expenditures Corporate tax rate Year 2 156.8 50.9 38.2 8.7 40.8 20% 3.7 28.3 20% 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 $ million. (Round to one decimal place.) The incremental earnings for year 2 is $1million. (Round to one decimal place.) b. What are the free cash flows for this project for the first two years? The free cash flow for year 1 is s million. (Round to one decimal place.) The free cash flow for year 2 is s million. (Round to one decimal place.)

Answer 1

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24 26 PE EPS, STOCK DIVIDEND - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins - 2x % Cut Σ AutoSum : A Calibri 11AA = = = Dr Wrap Text General Ea Copy Fill Paste B I U B- E A = 5 st Fat Merge Merge & Center - Center $ $ -% % Format Painter , .0 .00 . Conditional Format Cell Insert Delete Format Sort & Find & Formatting as Table Styles Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing Z139 fax ZC Z D ZE ZF ZG ZH ZI Z Formula Bar ZLA 20 21 22 23 YEAR 1 YEAR 2 INCREMENTAL EARNINGS FORECAST 25 SALES 118.1 156.8 LESS COST OF GOODS SOLD & 27 OPERATING EXPENSES 46.9 50.9 LESS DEPRECIATION 28.7 38.2 29 EBIT 42.5 67.7 LESS TAXES 8.5 13.5 31 UNLEVERED NET INCOME 34.0 54.2 32 33 CALCULATION OF FREE CASH FLOW 34 UNLEVERED NET INCOME 34.0 54.2 35 ADD DEPRECIATION 28.7 38.2 36 LESS CAPITAL EXPENDITURE 28.3 40.8 37 LESS INCREASE IN NWC 3.7 8.7 38 FREE CASH FLOW 30.7 42.9 39 40 H HIGH LOW TARGET PRICE STOCK DIV NAV HEDGE FUND ME EV PE EPS DIV ABNORMAL deberk MARGIN MONEY marginal tax PB ROPI APV ROSS price quote EVA MVAI Rea ferences B0 120% 0 + • A * OENG 01-11-2019 28 30 H a @ 9 5 w