The project will also utilize other equipment that the consultants did not value separately because the equipment is already owned and not being used in other projects. The equipment could instead be...

Extracted text: The project will also utilize other equipment that the consultants did not value separately because the equipment is already owned and not being used in other projects. The equipment could instead be donated to a charity, and the tax benefit of that donation would be $2.3 million (in other words, this is the total amount that your taxes would decrease by in period 0, if you donated the equipment rather than using it for the project). In addition, donating the equipment would generate goodwill and increased reputation which you feel would be worth an additional $1.7 million (in dollars today). What are the correct free cash flows (FCFS) for evaluating this project? Start from the correct Net Income which has already been given, and make any additional adjustments needed for any periods, in order to get the entire set of FCFS. Do not calculate the NPV – just give the FCF stream. Show your calculations but do not explain them except to label the numbers you give. [Note: Do not write an essay or explain concepts. Just show me your numbers, properly labeled (by labels, I mean row and column headings such as "Depreciation" or "Year 3"), and make the calculations clear (are you adding or subtracting?). I'd prefer that you keep the column/row formatting othe earlier calculations. Do NOT repeat the numbers before Net Income - just show the calculations after that, and the final CFs for each period. And please do not change the units - I'd like the answers in millions of dollars, not in dollars.] G


Extracted text: You are a manager at Percolated Fiber, which is considering expanding its operations. Your boss said to you "We owe these consultants $1.8 million for this report, and I am not sure their analysis makes sense. Before we spend $39 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 3 Sales revenue 64.0 64.0 40.0 , 24.0 64.0 - Cost of goods sold Gross profit -Selling, gen. & admin. exp. -Depreciation Net operating income - Income tax (30%) Net Income 40.0 40.0 24.0 24.0 3.8 3.8 3.8 13.0 13.0 13.0 7.2 7.2 7.2 2.2 2.2 2.2 5.0 5.0 5.0 Everything that the consultants have calculated is correct, as far as it goes. The project will require $18 million in working capital upfront (year 0), which will be fully