A firm expects a project to have the following incremental Income Statement: Year 2018 2019 2020...

 

Transcribed Image Text:

A firm expects a project to have the following incremental Income Statement: Year 2018 2019 2020 Revenues $38.4 $66.1 $48.9 Costs -24.3 -43.3 -32.4 Depreciation -2.9 -2.9 -2.9 EBIT 11.2 19.9 13.6 Taxes -4.0 -8.0 -6.0 NOPAT $7.2 $11.9 $7.6 It also expects that the working capital requirements of the project will lead to the following end-of-year balances that have been extracted from the Balance Sheet for the project: 111 Year 2018 2019 2020 Assets: Inventories 0.6 2.0 1.3 Assets: Accounts Receivable 0.3 1.0 0.7 Liabilities: Accounts Payable 0.8 2.2 0.9 It should be assumed that the above balances on the working capital accounts are incremental balances. As an example, you should assume that the shown $2.2 million Accounts Payable balance at the end of 2019 means that the Accounts Payable balance for the entire firm will be $2.2 million higher at the end of that year as a result of accepting the project relative to what that same balance would have been at that same point of time if it rejects the project instead. The firm expects that the project will not require any capital expenditure nor lead to any long-term assets being salvaged. All values in the statements above are in millions of dollars. (a) What is the expected incremental free cash flow (FCF) from the project in 2019? The expected incremental free cash flow (FCF) from the project in 2019 is $ million. (Round your answer to one decimal place) A firm expects a project to have the following incremental Income Statement: Year 2018 2019 2020 Revenues $38.4 $66.1 $48.9 Costs -24.3 -43.3 -32.4 Depreciation -2.9 -2.9 -2.9 EBIT 11.2 19.9 13.6 Taxes -4.0 -8.0 -6.0 NOPAT $7.2 $11.9 $7.6 It also expects that the working capital requirements of the project will lead to the following end-of-year balances that have been extracted from the Balance Sheet for the project: 111 Year 2018 2019 2020 Assets: Inventories 0.6 2.0 1.3 Assets: Accounts Receivable 0.3 1.0 0.7 Liabilities: Accounts Payable 0.8 2.2 0.9 It should be assumed that the above balances on the working capital accounts are incremental balances. As an example, you should assume that the shown $2.2 million Accounts Payable balance at the end of 2019 means that the Accounts Payable balance for the entire firm will be $2.2 million higher at the end of that year as a result of accepting the project relative to what that same balance would have been at that same point of time if it rejects the project instead. The firm expects that the project will not require any capital expenditure nor lead to any long-term assets being salvaged. All values in the statements above are in millions of dollars. (a) What is the expected incremental free cash flow (FCF) from the project in 2019? The expected incremental free cash flow (FCF) from the project in 2019 is $ million. (Round your answer to one decimal place)

Answer rating: 100% (QA)

Calculation of incremental Free cashflow from the project Particulars 2... View the full answer