Elmdale Enterprises is deciding whether to expand its production facilities. Although? long-term cas

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

Year 2

Revenues

112.3112.3

153.8153.8

COGS and Operating expenses​ (other than​ depreciation)

49.649.6

55.555.5

Depreciation

29.729.7

37.437.4

Increase in working capital

5.45.4

8.38.3

Capital expenditures

28.328.3

40.240.2

Corporate tax rate

20 %20%

20 %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?

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