题目
题目

Quiz:Quiz 9 F25

多项填空题

Part 1You 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 $ 1.3$1.3 million for this​ report, and I am not sure their analysis makes sense. Before we spend the $ 22$22 million on new equipment needed for this​ project, look it over and give me your​ opinion." You open the report and find the estimates that follow​ (in millions of​ dollars).​(Click on the Icon located on the​ top-right corner of the data table in order to copy its contents into a​ spreadsheet.)[table] | Project Year Copy to Clipboard + Open in Excel + Earnings Forecast​ ($000,000s) | 1 | 2 | . . . | 9 | 10 Sales revenue | 35.00035.000 | 35.00035.000 | | 35.00035.000 | 35.00035.000 minus−Cost of goods sold | 21.00021.000 | 21.00021.000 | | 21.00021.000 | 21.00021.000 equals=Gross profit | 14.00014.000 | 14.00014.000 | | 14.00014.000 | 14.00014.000 minus−​Selling, ​general, and administrative expenses | 1.7601.760 | 1.7601.760 | | 1.7601.760 | 1.7601.760 minus−Depreciation | 2.2002.200 | 2.2002.200 | | 2.2002.200 | 2.2002.200 equals=Net operating income | 10.040010.0400 | 10.040010.0400 | | 10.040010.0400 | 10.040010.0400 minus−Income tax | 3.5143.514 | 3.5143.514 | | 3.5143.514 | 3.5143.514 equals=Net income | 6.5266.526 | 6.5266.526 | | 6.5266.526 | 6.5266.526 [/table]All of the estimates in the report seem correct. You note that the consultants used​ straight-line depreciation for the new equipment that will be purchased today​ (year 0), which is what the accounting department recommended for financial reporting purposes. Canada Revenue Agency allows a CCA rate of 20 %20% on the equipment for tax purposes. The report concludes​ that, because the project will increase earnings by $ 6.526$6.526 million per year for 10​ years, the project is worth $ 65.26$65.26 million. You think back to your halcyon days in finance class and realize there is more work to be done. ​First, you note that the consultants have not factored in the fact that the project will require $ 9$9 million in working capital up front​ (year 0), which will be fully recovered in year 10. ​ Next, you see they have attributed $ 1.76$1.76 million of selling as well as general and administrative expenses to the​ project, but you know that $ 0.88$0.88 million of this amount is overhead that will be incurred even if the project is not accepted. ​ Finally, you know that accounting earnings are not the right thing to focus on.a. Given the available​ information, what are the free cash flows in years 0 through 10 that should be used to evaluate the proposed​ project? Part 1a. Given the available​ information, what are the free cash flows in years 0 through 10 that should be used to evaluate the proposed​ project?Start with calculating the free cash flow for year 0.​ (Round to the nearest​ million).The free cash flow for year 0equals=​$[input]enter your response here million.Part 2​Next, calculate the free cash flow for year 1. ​(Round to three decimal​ places). The free cash flow for year 1 is ​$[input]enter your response here million.Part 3In this​ step, calculate the free cash flow for year 2. ​(Round to three decimal​ places). The free cash flow for year 2 is ​$[input]enter your response here million.Part 4​Now, calculate the free cash flow for year 3. ​(Round to three decimal​ places). The free cash flow for year 3 is ​$[input]enter your response here million.Part 5​Next, calculate the free cash flow for year 4. ​(Round to three decimal​ places). The free cash flow for year 4 is ​$[input]enter your response here million.Part 6​Now, calculate the free cash flow for year 5. ​(Round to three decimal​ places). The free cash flow for year 5 is ​$[input]enter your response here million.Part 7Calculate the free cash flow for year 6. ​(Round to three decimal​ places). The free cash flow for year 6 is ​$[input]enter your response here million.Part 8​Now, calculate the free cash flow for year 7. ​(Round to three decimal​ places). The free cash flow for year 7 is ​$[input]enter your response here million.Part 9​Now, calculate the free cash flow for year 8. ​(Round to three decimal​ places). The free cash flow for year 8 is ​$[input]enter your response here million.Part 10​Next, calculate the free cash flow for year 9. ​(Round to three decimal​ places). The free cash flow for year 9 is ​$[input]enter your response here million.Part 11​Finally, calculate the free cash flow for year 10. ​(Round to three decimal​ places). The free cash flow for year 10 is ​$[input]enter your response here million.

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Question restatement: - You are evaluating a project for Northern Fibre. The consultant’s cash-flow table (in millions) shows yearly figures for sales, costs, SG&A, depreciation, operating income, taxes, and net income. The problem asks you to compute the free cash flows (FCFs) from year 0 to year 10 to evaluate the project, making necessary adjustments: exclude non-incremental overhead, account for the upfront working capital (WC) investment and its recovery in year 10, and use the correct FCF definition rather than accounting earnings. The supplied answers to fill in are: - Year 0 FCF: -31 - Year 1 FCF: 8.638 - Year 2 FCF: 8.33 - Year 3 FCF: 8.084 - Year 4 FCF: 7.886 - Year 5 FCF: 7.729 - Year 6 FCF: 7.603 - Year 7 FCF: 7.502 - Year 8 FCF: 7.421 - Year 9 FCF: 7.356 - Year 10 FCF: 16.305 Option-by-option analysis (why each figure is correct or incorrect): - Year 0 FCF = -31: The initial outlay consists of the equipment purchase (22 million) plus the upfront working capital requirement (9 million). There are no operating cash inflows in year 0, and tax shields or depreciation effects do not apply yet. Therefore the correct year-0 free cash flow is a outflow of 31 million. Any alternative number would imply either omitting one of the two init......Login to view full explanation

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