Question: please do years 0-10 thanks 1900 You are a manager at Northern Fibre, which is considering expanding its operations in synthetic fibre manufacturing Your boss
1900 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 consultants report on your desk and complains, "We owe these consultants $12 million for this report, and I am not sure their analysis makes sense. Before we spend the 519 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) 1 2 9 10 Sales revenue 35.000 35.000 35.000 35.000 -Cost of goods sold 21.000 21.000 21.000 21.000 Gross profit 14.000 14.000 14 000 14 000 -General, sales, and administrative expenses 1.520 1.520 1.520 1.520 -Depreciation 1.000 1.000 1.900 Net operating income 10.500 10 500 10 500 10580 -Income tax 3.703 3.703 3.703 3.703 Net income 0.877 6.877 6877 6.877 All of the estimates in the report seem correct. You note that the consultants used straight-line depreciation for the new equipment that will be purchased today year), which is what the accounting department recommended for financial reporting purposes CRA allows a CCA rate of 30% on the equipment for tax purposes. The report concludes that because the project wil increase earnings by $6.877 million per year for 10 years, the project is worth $68.77 million. You think back to your glory days in finance class and realize there is more work to be done! First you note that the consultants have not factored in the fact that the project will require 511 million in working capital up front (year ), which will be fully recovered in year 10. Next you see they have attributed $1.52 million of selling general and administrative expenses to the project, but you know that $0.76 milion 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 through 10 that should be used to evaluate the proposed project? The free cash flow for year is million (Round to three decimal places, and enter a decrease as a negative number.)
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