the project will require $15 million in working capital upfront (year U), which will be fully...

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the project will require $15 million in working capital upfront (year U), which will be fully recovered in year 10. Next, you see they have attributed $1.68 million of selling, general and administrative expenses to the project, but you know that $0.84 million of this amount is overhead that will be incurred even if the project is not accepted. Finally, you know that accounting earnings are not the right thing to focus on! 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? b. If the cost of capital for this project is 10%, what is your estimate of the value of the new project? [You answer below in the yellow highlighted cells.] a. Calculate the income tax rate as Income Tax/Net operating income $2.597/$7.420= 0.35 or 35%. Year 0 1 ... 10 Incremental Earnings Forecast (S000s) 1 Sales 2 3 Cost of goods sold SG&A Non-incremental SG&A 4 Depreciation 5 EBIT 6 Income tax at 35% 7 Unlevered Net Income Free Cash Flows are: Net income Add: Depreciation Capital Expenditure Increase in Working Capital Free Cash Flows b. NPV =? million the project will require $15 million in working capital upfront (year U), which will be fully recovered in year 10. Next, you see they have attributed $1.68 million of selling, general and administrative expenses to the project, but you know that $0.84 million of this amount is overhead that will be incurred even if the project is not accepted. Finally, you know that accounting earnings are not the right thing to focus on! 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? b. If the cost of capital for this project is 10%, what is your estimate of the value of the new project? [You answer below in the yellow highlighted cells.] a. Calculate the income tax rate as Income Tax/Net operating income $2.597/$7.420= 0.35 or 35%. Year 0 1 ... 10 Incremental Earnings Forecast (S000s) 1 Sales 2 3 Cost of goods sold SG&A Non-incremental SG&A 4 Depreciation 5 EBIT 6 Income tax at 35% 7 Unlevered Net Income Free Cash Flows are: Net income Add: Depreciation Capital Expenditure Increase in Working Capital Free Cash Flows b. NPV =? million

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a Given the available information the free cash flows in years 0 through 10 that should be used to e... View the full answer