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 $1.3 million for this report, and I am not sure their analysis makes sense. Before we spend the $21 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 34.000 34.000 20.400 20.400 13.600 13.600 1.680 1.680 2.100 2.100 9.820 9.820 3.437 3.437 6.383 6.383 9 34.000 20.400 13.600 1.680 2.100 9.820 3.437 6.383 10 34.000 20.400 13.600 1.680 2.100 9.820 3.437 6.383 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 $1.3 million for this report, and I am not sure their analysis makes sense. Before we spend the $21 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 34.000 34.000 20.400 20.400 13.600 13.600 1.680 1.680 2.100 2.100 9.820 9.820 3.437 3.437 6.383 6.383 9 34.000 20.400 13.600 1.680 2.100 9.820 3.437 6.383 10 34.000 20.400 13.600 1.680 2.100 9.820 3.437 6.383 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 $1.3 million for this report, and I am not sure their analysis makes sense. Before we spend the $21 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
34.000 34.000
20.400 20.400
13.600 13.600
1.680
1.680
2.100
2.100
9.820 9.820
3.437 3.437
6.383
6.383
9
34.000
20.400
13.600
1.680
2.100
9.820
3.437
6.383
10
34.000
20.400
13.600
1.680
2.100
9.820
3.437
6.383
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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