Incremental Earnings and Free Cash Flows
Not what you're looking for?
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 year ( in millions of dollars):
Year 1 Year 2
Revenues 125 160
Cost of goods sold& operating expense,other depreciation 40 60
Depreciation 25 36
Increase in net working capital 5 8
Capital Expenditures 30 40
Marginal corporate tax rate 35% 35%
a) What are the incremental earnings for this project for years 1 & 2?
b) What are the free cash flows for this project for the first two years?
Purchase this Solution
Solution Summary
This solution illustrates how to compute incremental earnings and free cash flows.
Solution Preview
Generally, incremental earnings is the net increase in net income from making an investment, while free cash flow is the effect on cash (increases and decreases) from making an investment.
a) What are the incremental earnings for this project for years 1 & 2?
Year 1 Year 2
Revenues ...
Purchase this Solution
Free BrainMass Quizzes
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Motivation
This tests some key elements of major motivation theories.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.