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free cash flow from year 0 to year 10 You are a manager at Northern Fibre, which is considering expanding its operations in synthetic fibre
free cash flow from year 0 to year 10
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 consultant's report on your desk, and complains, "We owe these consultants $1.4 million for this report, and I am not sure their analysis makes sense. Before we spend the $17 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): 10 Sales revenue 1 2 32.000 32.000 19.200 19.200 9 32.000 19.200 32.000 - Cost of goods sold 19.200 = Gross profit 12.800 12.800 12.800 12.800 1.360 1.360 1.360 1.360 General, sales, and administrative expenses Depreciation 1.700 1.700 1.700 1.700 = Net operating income 9.740 9.740 9.740 9.740 - Income tax 3.409 3.409 3.409 3.409 = Net income 6.331 6.331 6.331 6.331 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, and enter a decrease as a negative number.)Step by Step Solution
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