hi, guys, can you have me out this questions, i try to understand how to calculated the revenue and the cash operation expense, from that i can find the EBIT to calculate the free cash flow
All amounts are in $USD. Fortescue is deciding between two iron ore projects in March 2017. Project A has
an initial outlay of $13.75 billion and Project B has an initial outlay of $15.75 billion.
Project A is projected to sell 155 million tonnes of iron ore for the next 5 years and have cost of sales equal to 40% of iron ore revenues. In addition to these cost of sales expenses Project A will use 40 million barrels of crude oil each year with each barrel costing $100.
Project B will sell 200 million tonnes of iron ore for the next 5 years and have cost of sales equal to 45% of iron ore revenues. In addition to these cost of sales expenses Project B will use 30 million barrels of crude oil each year with each barrel costing $100. Both Project A and B will also incur additional working capital expenses at the beginning of the projects of $400,000 and recover
these at the end of year 5.
Assume the iron ore will stay at the price it was in March 2017 for the next 5
years. Both mines have depreciation costs of $2,000,000,000 a year. The tax rate is 30%. All cash flows are annual and receive or pay at the end of each year.
Fortescue is deciding between two iron ore mining projects. Use an excel
spreadsheet to find the free cash flows for the following two projects A and B
described above from years 0-5.
Thank a lot for your help.