Only correct answer Revenues- Manufacturing Expenses- Marketing Expenses- Depreciation=EBIT- Taxes (20%)=Unlevered net income+Depreciation- Additions to Net Working Capital- Capital Expenditures=Free Cash FlowYear 0-9Years 1 to 103.7-0.4-0.25-0.52.55-0.512.04+0.5-0.22.34 Panjandrum Industries, a manufacturer of industrial piping, is evaluating whether it should expand into the sale ofplastic fittings for home garden sprinkler systems. It has mad the above estimates of free cash flows resultingfrom such a decision (all quantities in millions of dollars). There are some concerns that estimates ofmanufacturing expenses may be low, due to the rising cost of raw materials. What is the break-even point formanufacturing expenses, if all other estimates are correct and the cost of capital is 9%?A. $1.40 millionB. $1.29 millionOC. $1.64 millionOD. $1 17 million.

Break even point is the point where present value of cash inflow is equal to present value of cash…

Answered: Revenues - Manufacturing Expenses -…

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 8EP

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Revenues - Manufacturing Expenses - Marketing Expenses - Depreciation =EBIT - Taxes (20%) =Unlevered net income +Depreciation - Additions to Net Working Capital - Capital Expenditures =Free Cash Flow Year 0 -9 Years 1 to 10 3.7 -0.4 -0.25 -0.5 2.55 -0.51 2.04 +0.5 -0.2 2.34