Question
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 $1.7 million for this report, and I am not sure their analysis makes sense. Before we spend the $18 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): Sales revenue -Cost of goods sold 1 30.000 2 9 10 30.000 30.000 30.000 18.000 18.000 18.000 18.000 = Gross profit 12.000 12.000 12.000 12.000 - General, sales, and administrative expenses 1.440 1.440 1.440 1.440 - Depreciation 1.800 1.800 1.800 1.800 = Net operating income 8.760 8.760 8.760 8.760 - Income tax 3.066 3.066 3.066 3.066 = Net income 5.694 5.694 5.694 5.694
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