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Etobicoke Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are...

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Finance

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Etobicoke Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult co estimate, management has projected the following cash flows for the first two years (in millions of dollars): Year 1 Year 2 Revenues 122.9 155.1 Operating Expenses (other than depreciation) 42.1 62.9 CCA 23.3 36.5 Increase in Net Working Capital 3.5 8.3 Capital Expenditures 33.8 40.9 Marginal Corporate Tax Rate 35% 35% What are the incremental earnings for this project for years 1 and 27 (Note: Assume any incremental cost of goods sold is mcluded as part of operating expenses.) - What are the free cash flows for this project for the first two years? Calculate the incremental earnings for Year 1 of this project below: (Round to one decimal place.) Incremental Earnings Forecast (millions) Year 1 Sales Operating Expenses CCA EBIT $ Income tax at 35% Unlevered Net Income

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