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 is included as part of operating expenses.) Calculate the incremental earnings of this project below: (Round to one decimal place.) Incremental Earnings Forecast (millions) Sales Operating Expenses Depreciation EBIT Income tax at 21% Unlevered Net Income Year 1 Year 2 $ $ SA $ 69 $ GA 67 69 $ $ $ 6969 $ $ SA
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 is included as part of operating expenses.) Calculate the incremental earnings of this project below: (Round to one decimal place.) Incremental Earnings Forecast (millions) Sales Operating Expenses Depreciation EBIT Income tax at 21% Unlevered Net Income Year 1 Year 2 $ $ SA $ 69 $ GA 67 69 $ $ $ 6969 $ $ SA
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 2STP
Related questions
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):
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)
Sales
Operating Expenses
Depreciation
EBIT
Income tax at 21%
Unlevered Net Income
Year 1
Year 2
$
$
SA
$
69
$
GA
67
69
$
$
$
6969
$
$
SA](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fae259756-8f06-4e5c-ae2d-b16c40451d6f%2Fc49d630f-ecdb-4532-ae16-fc3391f640f6%2Fhk40bqs_processed.jpeg&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 is included as part of operating expenses.)
Calculate the incremental earnings of this project below: (Round to one decimal place.)
Incremental Earnings Forecast (millions)
Sales
Operating Expenses
Depreciation
EBIT
Income tax at 21%
Unlevered Net Income
Year 1
Year 2
$
$
SA
$
69
$
GA
67
69
$
$
$
6969
$
$
SA
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