Question list

$()$ Question $10$

$(2)$ Question $11$

Question $12$

$($ Question $13$

You are a manager at Percolated Fiber, which is considering expanding its operations in

synthetic fiber manufacturing. Your boss comes into your office, drops a consultant's

report on your desk, and complains, $"$We owe these consultants $$1\mathrm{.}100$ million for

this report, and I am not sure their analysis makes sense. Before we spend the $$28\mathrm{.}700$

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$)$:

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

$0),$ which is what the accounting department recommended. They also calculated the

depreciation assuming no salvage value for the equipment. The report concludes that

because the project will increase earnings by $$6\mathrm{.}347$ million per year for $10$ years, the

project is worth $$63\mathrm{.}470$ million. You think back to your glory days in finance class and

realize there is more work to be done!

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.$)$

Data table

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