1 9 You are a manager at Percolated Fiber, which is considering expanding its operations in synthetic fiber manufacturing Your boss comes into your office drops a consultant's report on your desk, and complains, "We owe these consultants $19 million for this report and I am not sure their analysis makes sense Before we spend the $19 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 following icon in order to copy its contents into a spreadshoot) Project Year Earnings Forecast (8 million) 2 10 Sales revenue 32.000 32 000 32.000 32000 Cost of goods sold 19 200 19.200 19 200 19 200 Gross profit 12 800 12.800 12.800 12.800 Selling general, and administrative expenses 1.520 1.520 1520 1520 Depreciation 1 900 1 900 1 000 1.900 Net operating income 9380 9.300 9.380 ..Given the available information, what are the free cash flows in years o through 10 that should be used to evaluate the proposed project? The tree cash flow for year is smilion (Round to three decimal places and enter a decrease as a negative number) The tree cash flow for years 1 to 965 million (Round to the decimal places and enter a decrease as a negative numbet) The tree cash flow for your 10 million (Round to three decimai places and enter a decrease as a negative number) b. If the cost of capital for this project is 9%, what is your state of the value of the new project? The value of the project is million (Round to three decimal places) 9.380 190 Depreciation 1.900 1 VUU T HUU = Net operating income 9.380 9.380 9.380 9.380 - Income tax 1.876 1.876 1 878 1876 = Not unlovered income 7.504 7504 7504 7.504 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 O), which is what the accounting department recommended. The report concludes that because the project will increase oamings by S7 504 million per year for ten years, the project is worth $75.04 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 $ 14 million in working capital upfront year), which will be fully recovered in year 10 Next, you see they have attributed $152 million of selling general and administrative expenses to the project, but you know that 50 78 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 ont a. Given the available information, what are the free cash flows in years through 10 that should be used to evaluate the proposed project? b. If the cost of capital for this project is 9%, what is your estimate of the value of the new project? a. Given the available information, what are the free cash flows in yours through 10 that should be used to evaluate the proposed project The free cash flow for your own million (Round to three decimal places and enter a decrease as a negative number The tree cash tow for yours 1 to $1 million (Round to three decimal places and enter a decrease as a negative number) The free cash flow for year 10 is 5 million (Round to three decimal places and enter a decrease as a negative number b. If the cost of capital for this project is 0%, who is your estimate of the value of the new project The value of the project is million (Round to three decimal places