|11-9. (Calculating free cash flows) You are the product manager of Lexcon Fitness and are considering the production of new elliptical trainers. You feel you can sell 5,500 of these per year for 6 years (after which time this project is terminated due to product obsolescence). The elliptical trainers would sell for $1,200 each and have a variable cost of $600. The annual fixed costs associated with production would be $1.2 million. In addition, there would be a $4.5 million initial expenditure associated with the purchase of new production equipment. It is assumed that this initial expenditure will be depreciated using the straight-line method down to zero in 6 years. This project will also require a one-time initial investment of $800,000 in net working capital associated with inventory and working capital investment will be recovered when the project is terminated. Finally, assume that the firm's marginal tax rate is 22 percent. a. What is the initial outlay associated with this project? b. What are the annual free cash flows associated with this project for years 1 through 5? c. What is the terminal cash flow in year 6 (that is, what is the free cash flow in year 6 plus any additional cash flows associated with the termination of the project)? d. What is the project's NPV given a 12 percent required rate of return