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Hi if you could find all the values stated in part a of the question please You are a manager at Northern Fibre, which is

image text in transcribedHi if you could find all the values stated in part a of the question please

image text in transcribed

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 $1.9 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): 1 9 10 35.000 35.000 21.000 Sales revenue - Cost of goods sold = Gross profit - General, sales, and administrative expenses - Depreciation = Net operating income - Income tax 2 35.000 21.000 14.000 1.360 1.700 10.940 3.829 7.111 14.000 1.360 1.700 10.940 3.829 7.111 35.000 21.000 14.000 1.360 1.700 21.000 14.000 1.360 1.700 10.940 3.829 10.940 3.829 = Net income 7.111 7.111 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 o), 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 will increase earnings by $7.111 million per year for 10 years, the project is worth $71.11 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 $9 million in working capital up front (year O), which will be fully recovered in year 10. Next you see they have attributed $1.36 million of selling, general and administrative expenses to the project, but you know that $0.68 million 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 0 through 10 that should be used to evaluate the proposed project? 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 $ - 9.888 million. (Round to three decimal places, and enter a decrease as a negative number.) You are a manager at Northern Fibre, which is considering expanding its operations in synthetic fibre manufacturing Your bous comes to your for drops a conneport on your desk, and complains, "We owe these consultants $1.9 million for this report, and I am not sure their analysis makes sense efore we spend the $1 milion on wheeded for the 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 35.000 35.000 35 000 36.000 - 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 1.350 1.360 1360 1.360 -Depreciation 1.700 1.700 1.700 1.700 Net operating income 10 10 10.540 10.940 10 940 -Income tax 3.829 3.820 3820 3.829 Nat income 7.111_74111 7.111 74111 a. Given the avaiable information, what are the free cash flows in yours through to that should be used to evaluate the proposed project? The free cash flow for year is 3 million (Round to three decimat places and enter a decrease as a gatve number:)

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