You are a manager at Percolated Fibre, which in considering expanding its operations in synthetic fibre manufacturing Yo

[answerhappygod]

You Are A Manager At Percolated Fibre Which In Considering Expanding Its Operations In Synthetic Fibre Manufacturing Yo 1 (29.1 KiB) Viewed 74 times

You Are A Manager At Percolated Fibre Which In Considering Expanding Its Operations In Synthetic Fibre Manufacturing Yo 2 (16.75 KiB) Viewed 74 times

You Are A Manager At Percolated Fibre Which In Considering Expanding Its Operations In Synthetic Fibre Manufacturing Yo 3 (12.33 KiB) Viewed 74 times

You are a manager at Percolated Fibre, which in 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 $1.2 million for this report, and I am not sure thoir analysis makes sense. Before we spend the $20.6 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) Click on the foon located on the top right corner of the data tablo below an order to copy its information into a spreadshot Project year Earnings forecast 1 2 9 10 Sales revenue 29.000 29.000 29.000 29.000 -Cost of goods sold 17.400 17.400 17400 17.400 Gross profit 11.000 11.600 11.600 11.600 - General sales and administrative expenses 1.648 1.648 1.648 1.640 - Depreciation 2.000 2.000 2000 2060 -Net operating profit 7,892 7.892 7,892 7.892 -Income tax 2368 2368 2.368 2368 Net profit 5.524 5.524 5524 5.524 All of the estimates in the report som correct. You note that the consultants used straight-line depreciation for the new equipment that will be purchased today year, which is what the accounting department recommended. They also called the depreciation assuming no salvage value for the equipment which is the company's assumption in this case. The report concludes that because the project will increase earnings by 55.524 million per year for ten years, the project is worth 555 24 milion You think back to your glory days in finance class and raise there is more work to be donal
All of the estimates in the report se correct. You note that the consultants used straight line depreciation for the new equipment that will be purchased today yw o which is what the Accounting department recommended. They also calculated the depreciation assuring no salvage value for the equipment, which is the company's assumption in this case. The report concludes that because the project will increase comings by 55.524 million per year for ten years, the project is worth $55.24 million. You think back to your glory days in finance class and realise there is more work to be donel First, you note that the constants have not factored in the fact that the project will require $14.2 milion in not working capital up front year), which will be fully recovered in year 10 Next, you see they have tried $1.548 milion of selling general and administrative expenses to the project, but you know that $0 82 million of this amount is overhead that will be incurred eventi project is not accepted. Finally, you know that accounting earnings we not the right thing to focus ont a. Given the available information, what are the free cash flows in years 0 to 10 that should be used to evaluate the proposed project? b. if the cost of capital for this project is 13%, what is your estimate of the value of the new project?
a. The free cash low for years The tree cash flow for years 1 to 5 The free cash flow for year 10 is $ million (Pound to three decimal places) milton (Round to the decimal places) million (Round to three decimal places) b. if the cost of capital for this project is 13%, the value of project is million (Round to three decimal places) You accept the project. (Choose the best answer from the drop down menu)