You are a manager at Percolated Fiber, which is considering expanding its operations. Your boss said to you "VWe owe these consultants $1.8 million for this repor and all they gave us is Net Income. Before we spend $42 million on new equipment needed for this project, look it over and give me your opinion." Here are the report's estimates (in millions of dollars; note that the question is continued below, so you need to scroll down to see it all): 1 2 Sales revenue Cost of goods sold Gross profit -Selling, gen. & admin. exp. -Depreciation Net operating income - Income tax (30%) 64.0 64.0 39.0 25.0 64.0 39.0 39.0 25.0 25.0 3.8 3.8 3.8 14.0 14.0 7.2 14.0 7.2 7.2 2.2 2.2 2.2 Net Income 5.0 5.0 5.0 Everything that the consultants have calculated is correct, as far as it goes. The project will require $13 million in working capital upfront (year 0), which will be fully
You are a manager at Percolated Fiber, which is considering expanding its operations. Your boss said to you "VWe owe these consultants $1.8 million for this repor and all they gave us is Net Income. Before we spend $42 million on new equipment needed for this project, look it over and give me your opinion." Here are the report's estimates (in millions of dollars; note that the question is continued below, so you need to scroll down to see it all): 1 2 Sales revenue Cost of goods sold Gross profit -Selling, gen. & admin. exp. -Depreciation Net operating income - Income tax (30%) 64.0 64.0 39.0 25.0 64.0 39.0 39.0 25.0 25.0 3.8 3.8 3.8 14.0 14.0 7.2 14.0 7.2 7.2 2.2 2.2 2.2 Net Income 5.0 5.0 5.0 Everything that the consultants have calculated is correct, as far as it goes. The project will require $13 million in working capital upfront (year 0), which will be fully
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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What are the correct free cash flows for evaluating this project?
Start from the correct net income which has already been given.
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