You are a manager at Percolated Fiber, which is considering expanding its operations. Your boss said to you "We already owe these consultants $300,00, and all they gave us is Net Income. Before we spend 548 milion on new equipment for this project, look the report over and give me your opinion. Here are the report's estimates (in milions of dollars, note that the question is continued below, so you need to scroll down to see it all 1 2 3 Sales revenue 540 54,0 64.0 Cost of goods sold 39.0 39.0 390 Gross profit 250 25.0 250 Seling.gen & admin 18 1.8 18 Depreciation 160 160 160 Net Operating income 7.2 72 -Income tax (30%) 22 22 2.2 Net Income 5.0 5.0 50 Everything that the consultants have caldated is correct an tur ant goes. The project will require S4 million in working capital upfront (yew), which will be fully recovered in the last year of the project (year 3) The project will also le other equipment that the consultants did not value separately because the equipment is ready owned and not being used in other projects. The equipment could instead be donated to a charity. There would be nota benefit from that donation because the equipment is fully deprecated, but donating the equipment would generate goodwill and increased reputation which you feel would be worth $1.7 million on dollars today! Your cost of capital is 7. What is the one number you should use to decide whether to accept or reject this project? Report a number in millions of dollars, not in dollars. Hints (a) Start from the correct Net Income which has wready been given {b} Make any additional dimens needed for each relevant period. In order to get the final complete set of FCF tel The one number that you should use for accept reject is the one we talked about so much in Chapter 8. You should know what key measure should be used to evaluate projects. (dWe worked two variations of the problem (Percolated Fiber) in the class slides so see the slides if you're not sure how to approach it The number we should use to evaluate this project expressed in millions of dollars to one decimal place is You are a manager at Percolated Fiber, which is considering expanding its operations. Your boss said to you "We already owe these consultants $300,00, and all they gave us is Net Income. Before we spend 548 milion on new equipment for this project, look the report over and give me your opinion. Here are the report's estimates (in milions of dollars, note that the question is continued below, so you need to scroll down to see it all 1 2 3 Sales revenue 540 54,0 64.0 Cost of goods sold 39.0 39.0 390 Gross profit 250 25.0 250 Seling.gen & admin 18 1.8 18 Depreciation 160 160 160 Net Operating income 7.2 72 -Income tax (30%) 22 22 2.2 Net Income 5.0 5.0 50 Everything that the consultants have caldated is correct an tur ant goes. The project will require S4 million in working capital upfront (yew), which will be fully recovered in the last year of the project (year 3) The project will also le other equipment that the consultants did not value separately because the equipment is ready owned and not being used in other projects. The equipment could instead be donated to a charity. There would be nota benefit from that donation because the equipment is fully deprecated, but donating the equipment would generate goodwill and increased reputation which you feel would be worth $1.7 million on dollars today! Your cost of capital is 7. What is the one number you should use to decide whether to accept or reject this project? Report a number in millions of dollars, not in dollars. Hints (a) Start from the correct Net Income which has wready been given {b} Make any additional dimens needed for each relevant period. In order to get the final complete set of FCF tel The one number that you should use for accept reject is the one we talked about so much in Chapter 8. You should know what key measure should be used to evaluate projects. (dWe worked two variations of the problem (Percolated Fiber) in the class slides so see the slides if you're not sure how to approach it The number we should use to evaluate this project expressed in millions of dollars to one decimal place is