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 $1.3million for this report, and I am not sure their analysis makes sense. Before we spend the $24 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 (inmillions of dollars):12910...Sales revenue29.00029.00029.00029.000- Cost of goods sold= Gross profit- General, sales, and administrative expenses- Depreciation= Net operating income- Income tax17.40017.40017.40017.40011.60011.60011.60011.6001.9201.9201.9201.9202.4002.4002.4002.4007.28007.28007.28007.28002.5482.5482.5482.548= Net income4.7324.7324.7324.732...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.)

Here, Cost of Project is $24 millions Net Income of Project is $4.732 million Depreciation is 2.400…

'ou 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. nillion for this report, and I am not sure their analysis makes sense. Before we spend the $24 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 nillions of dollars): 1 2 9 10 ... 29.000 Sales revenue - Cost of goods sold = Gross profit - General, sales, and administrative expenses - Depreciation = Net operating income - Income tax = Net income 29.000 29.000 29.000 17.400 17.400 17.400 17.400 11.600 11.600 11.600 11.600 1.920 1.920 1.920 1.920 2.400 2.400 2.400 2.400 7.2800 7,2800 7.2800 7.2800 2.548 2.548 2.548 2.548 4.732 4.732 4.732 4.732 . If the cost of capital for this project is 8%, what is your estimate of the value of the new project?

'ou 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. nillion for this report, and I am not sure their analysis makes sense. Before we spend the $24 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 nillions of dollars): 1 2 9 10 ... 29.000 Sales revenue - Cost of goods sold = Gross profit - General, sales, and administrative expenses - Depreciation = Net operating income - Income tax = Net income 29.000 29.000 29.000 17.400 17.400 17.400 17.400 11.600 11.600 11.600 11.600 1.920 1.920 1.920 1.920 2.400 2.400 2.400 2.400 7.2800 7,2800 7.2800 7.2800 2.548 2.548 2.548 2.548 4.732 4.732 4.732 4.732 . If the cost of capital for this project is 8%, what is your estimate of the value of the new project?

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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