1) You are a manager at Percolated Fiber (PF) which is considering expanding its operations in synthetic fiber manufacturing. Your boss comes into your office and asks you to put together an analysis on whether or not the firm should spend $30 million on new plant & equipment ($20 million up front and $10 million during the first year). After reviewing the plans you come up with the following forecasts on the decision: general sales and administrative expenses 2, depreciation expense 3 (assume starts in year 2 when operations begin), cost of goods sold 18, sales revenue 30, change in NWC per year 1.5, and capital expenditure 30 (all in millions of dollars). The WACC for PF is 14%. Assume the cash flows are constant each year . (50 pts.)

	Years 0-11
Revenue
Cost of Goods Sold
General Sales & Admin Expense
Depreciation Expense
EBIT
Taxes (35%)
Operating Income AT
Depreciation Expense
Change in NWC
Capital Expenditure
Free Cash Flow

a. 1^st Scenario: Calculate the payback period, NPV, IRR and MIRR of the project assuming a 10-year useful life. At the end of ten years, you believe you can sell the equipment for $2 mil on an AT basis. Should you accept the project? Why or why not? Explain your answer.

b. 2^nd Scenario: More realistically, the plant will continue to exist as long as the company exists