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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
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 $1.6 million for this report, and I am not sure their analysis makes sense. Before we spend the $16 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): Project Year Earnings Forecast ($000,000s) es revenue -Cost of - Gross profit -General, sales, and administative expenses 18.000 18.000 12.000 2.000 1.280 1.280 1.600 1.600 1200 3.192 3.192 5.928 5.928 18.000 8.000 12.000 2.000 1.280 1.600 1200 3.192 5.928 sold Depreciation -Net operating income - Income tax - Net income 1.280 1.600 1200 3.192 5.928 1200 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 S. million. (Round to three decimal places and enter a decrease as a negative number.)
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