if the cost of captial is 11% what is the NPV of this new project?

You are a manager at Northern Fibre, which is considering expanding its operations in synthetic fibre manulacturing. Your boss comes into your attice, drops a consuitant's report on your desk, and complains, "We owe these consullants $1.9 million for this report, and 1 am not sure their analysis makos sense. Before we spend the $18 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the foliowing estimates in milions of dollars): 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 foday (year 0). which is what the accounting department recommended for financial reporting purposes. CRA allows a CCA rate of 20% on the equiprient for fax purposes. The. report concludes that because the project will increase earnings by $5.694 milion per year for ten years, the project is worth $56.94 million. You think back to your glory 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 $15 million in working capital up front (year 0), which wil be fuly recovered in year 10 . Next you see they have attributed $1.44 million of selling, genoral and administrative expenses to the project, but you know that $0.72 mailion of this amount is overhead that will be incurred even if the project is not accepted. Finally, you know that accounting earrings are not the right thing to focus on? b. If the cost of capital for this project is 11%, whal is your estimate of the value of the new projoct