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You are a maneger at Northem Fibre, which is sonsidering expanding its operations in ayrathetic fibee manufacturing. Your boss comes into your office, drops a

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You are a maneger at Northem Fibre, which is sonsidering expanding its operations in ayrathetic fibee manufacturing. Your boss comes into your office, drops a consultants report on your dosk ant complains. Whe owe these consultants 51.6 milion for this report, and 1 am not sure their analysis makes sanse. Bafore we spend the $21 million on new equipinent needed for this project. look if over and give me your epinion" "You open the report and find the folowing ostimates (in millions of dollars). All of the estimates in the report seem coerect You note that the consultants used straight-tine depreciation for the new equipment that will be purchased today (year of, Which is what be accounting department recommended for financial raporting purpobes. CRA alows a CCA rate of 30% on the equpment for tinx purposes. The report concludes that because the project will increase earnings by $4.043 mition per year for 10 years, the project is worth 540.43 milion. You think back to your glory days in france class and realcze ethre is more work to be done! Firat you note that the tonsultants have not factored in the face that the project will require $10 million in working captal up front (Year 0 ), which will be fully recovered in year 10 . Nert you see they have attrouted 51.68 million of sefing. general and administrative expenses to the project, but you know that 50.84 million of this amount is overhead that will be incurned even if the project is not accepted. Finaly, you know that accounting samings are not the night thing to focus on! a. Given the avalabie information, what are the bee cash flows in years 0 through 10 that should be used to evaluate the proposed project? 2. Given the avalabie intormation, what are the free cash fows in ynars 0 through 10 that should be used to evaluate the proposed project? The free cash flow for year D is 1 milion, (Round to three decimat places, and enter a decreate as a negathe number) The tree cash fiow for year 1 is 1 milson. (Round to throe docimai places, and entor a decrease as a negative number.)

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