b. If the cost of capital for this project is 8%, what is your estimate of the value of the new project? Value of project=$ million (Round to three decimal places.)
b. If the cost of capital for this project is 8%, what is your estimate of the value of the new project? Value of project=$ million (Round to three decimal places.)
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
Related questions
Question
Ee 417.
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 $1.5 million for this report, and I am not sure
their analysis makes sense. Before we spend the $16 million on new equipment needed for this project, look it over and give me your
opinion." You open the report and find the following estimates (in millions of dollars):
Sales revenue
-Cost of goods sold
=Gross profit
-General, sales, and administrative expenses
-Depreciation
Net operating income
-Income tax
2
33.000
19.800
1
33.000
19.800
13.200
13.200
1.280
1.280
1.600
1.600
10.3200 10.3200
3.612 3.612
9
33.000
19.800
13.200
1.280
1.600
10.3200
3.612
10
33.000
19.800
13.200
1.280
1.600
10.3200
3.612
b. If the cost of capital for this project is 8%, what is your estimate of the value of the new project?
Value of project=$ million (Round to three decimal places.)
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