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 $1.9 million for this report, and I am not sure their analysis makes sense. Before we spend the $28 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 27.000 16.200 2 27.000 16.200 10.800 10.800 2.240 2.240 2.800 2.800 5.760 5.760 2.016 2.016 3.744 3.744 9 27.000 16.200 10.800 2.240 2.800 5.760 2.016 3.744 10 27.000 16.200 10.800 2.240 2.800 5.760 2.016 3.744 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 $1.9 million for this report, and I am not sure their analysis makes sense. Before we spend the $28 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 27.000 16.200 2 27.000 16.200 10.800 10.800 2.240 2.240 2.800 2.800 5.760 5.760 2.016 2.016 3.744 3.744 9 27.000 16.200 10.800 2.240 2.800 5.760 2.016 3.744 10 27.000 16.200 10.800 2.240 2.800 5.760 2.016 3.744 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 $1.9 million for this report, and I am not sure their analysis makes sense. Before we spend the $28 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
27.000 27.000
16.200 16.200
10.800
10.800
2.240
2.240
2.800
2.800
5.760
5.760
2.016 2.016
3.744
3.744
9
27.000
16.200
10.800
2.240
2.800
5.760
2.016
3.744
10
27.000
16.200
10.800
2.240
2.800
5.760
2.016
3.744
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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