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Arnold Inc. is considering a proposal to manufacture high - end protein bars used as food supplements by body builders. The project requires use of
Arnold Inc. is considering a proposal to manufacture highend protein bars used as food supplements by body builders. The project requires use of an existing warehouse, which the firm acquired
three years ago for $ million and which it currently rents out for $ Rental rates are not expected to change going forward. In addition to using the warehouse, the project requires an upfront
investment into machines and other equipment of $ million. This investment can be fully depreciated straightline over the next years for tax purposes. However, Arnold Inc. expects to
terminate the project at the end of eight years and to sell the machines and equipment for $ Finally, the project requires an initial investment into net working capital equal to of
predicted firstyear sales. Subsequently, net working capital is of the predicted sales over the following year. Sales of protein bars are expected to be $ million in the first year and to stay
constant for eight years. Total manufacturing costs and operating expenses excluding depreciation are of sales, and profits are taxed at
a What are the free cash flows of the project?
b If the cost of capital is what is the NPV of the project?
a What are the free cash flows of the project?
The FCF for year is $ million. Round to three decimal places.
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