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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

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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 consultant's report on your desk, and complains, "We owe these consultants $1.8 million for this report, and 1 am not sure their analysis makes sense. Before we spend the 522 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 milions of dollars): All of the estimates in the report seem conect. You note that the consultants used straight -ine deprecraton for the new equipment that will be purchased today (year 0), which is what the accounting department recommended for financial reporting purposes. CRA allows a CCA rate of 45% on the equipment for tax purposes. The report concludes that because the project will increase earnings by $4706mili on per year for 10 years, the project is worth $47.06 milion. You think back to your glory days in finance class and realize there is more work to be donel First you note that the consultants have not factored in the fact that the project will require $15 million in working capital up front (year 0 ), which will be fully recovered in year 10. Next you see they have attributed $1.76milli on of seling. general and administrative expenses to the project, but you know that 50.88m lilion 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 avallable 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 $ million. (Round to three decimal places, and enter a decrease as a negative number) The free cash flow for year 1 is 5 milson. (Round to thee decimal places, and enter a decrease as a negative number) The free cash tlow for year 2 is 5 malion. (Round to three decimal places, and enter a decrease as a negative number) The free cash flow for year 3 is 5 million. (Round to three decimal places, and enter a decrease as a negative number) The free ciah flow for year 4 is 5 milion. (Round to three decimal places, and enter a decrease as a negative number) The free cash flow for year 5 is 5 . million. (Round to three decimal places, and enter a decrease as a negative number) The free cash flow for year 6 is 5 malion. (Round to three decimal places, and enter a decrease as a negative number) The free cash flow for year 7 is 5 million. (Round to three decimal placos, and enter a decrease as a negative number). The free cash flow for year 8is$ milion. (Round to three decimal places, and enter a decrease as a negative number) The free cash flow for year 9 is 5 mision (Round to three decimal places, and enter a decrease as a negative number) The free cash flow for year 10 is 5 mision. (Round to three decimal places, and enter a decrease as a negative number)

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