You are a manager at Northern Fibre, which is considering expanding its operations in synthetic fibre manufacturing. Your boss comes into your office, drops a consultant's report on your desk, and complains, "We owe these consultants $1.6 million for this report, and I am not sure their analysis makes sense. Before we spend the $29 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): Sales revenue -Cost of goods sold = Gross profit - General, sales, and administrative expenses -Depreciation = Net operating income -Income tax =Net income 1 2 32.000 32.000 19.200 19.200 12.800 12.800 2.320 2.320 2.900 2.900 7.580 7.580 2.653 2.653 4.927 4.927 9 32.000 19.200 12.800 2.320 2.900 7.580 2.653 4.927 10 32.000 19.200 12.800 2.320 2.900 7.580 2.653 4.927 a. Given the available information, what are the free cash flows in years 0 through 10 that should be used to evaluate the proposed project? The free cash flow for year 0 is $ million. (Round to three decimal places and enter a decrease as a negative number.)
You are a manager at Northern Fibre, which is considering expanding its operations in synthetic fibre manufacturing. Your boss comes into your office, drops a consultant's report on your desk, and complains, "We owe these consultants $1.6 million for this report, and I am not sure their analysis makes sense. Before we spend the $29 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): Sales revenue -Cost of goods sold = Gross profit - General, sales, and administrative expenses -Depreciation = Net operating income -Income tax =Net income 1 2 32.000 32.000 19.200 19.200 12.800 12.800 2.320 2.320 2.900 2.900 7.580 7.580 2.653 2.653 4.927 4.927 9 32.000 19.200 12.800 2.320 2.900 7.580 2.653 4.927 10 32.000 19.200 12.800 2.320 2.900 7.580 2.653 4.927 a. Given the available information, what are the free cash flows in years 0 through 10 that should be used to evaluate the proposed project? The free cash flow for year 0 is $ million. (Round to three decimal places and enter a decrease as a negative number.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You are a manager at Northern Fibre, which is considering expanding its operations in synthetic fibre manufacturing. Your boss comes into your office, drops a consultant's report on your desk,
and complains, "We owe these consultants $1.6 million for this report, and I am not sure their analysis makes sense. Before we spend the $29 million on new equipment needed for this project, look
it over and give me your opinion." You open the report and find the following estimates (in millions of dollars):
Sales revenue
-Cost of goods sold
= Gross profit
- General, sales, and administrative expenses
-Depreciation
= Net operating income
-Income tax
= Net income
1
2
32.000 32.000
19.200 19.200
12.800 12.800
2.320
2.900
2.320
2.900
7.580
7.580
2.653 2.653
4.927
4.927
...
9
32.000
19.200
12.800
2.320
2.900
7.580
2.653
4.927
10
32.000
19.200
12.800
2.320
2.900
7.580
2.653
4.927
a. Given the available information, what are the free cash flows in years 0 through 10 that should be used to evaluate the proposed project?
The free cash flow for year 0 is $ million. (Round to three decimal places and enter a decrease as a negative number.)
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