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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
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 $1.3 million for this report, and I am not sure their analysis makes sense. Before we spend the $23 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 2 9 10 Sales revenue 30.000 30.000 30.000 30.000 -Cost of goods sold = Gross profit 12.000 18.000 18.000 12.000 18.000 18.000 12.000 12.000 General, sales, and administrative expenses 1.840 1.840 1.840 1.840 -Depreciation 2.300 2.300 2.300 2.300 Net operating income 7.860 7.860 7.860 7.860 - Income tax 2.751 2.751 2.751 2.751 = Net income 5.109 5.109 5.109 5.109 a. Given the available information, what are the free cash flows in years 0 through 10 that should be used to evaluate the proppsed project? The free cash flow for year 0 is $million. (Round to three decimal places, and enter a decrease as a negative number.)
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