Question 2 - Capital Budgeting (12 points) Volkswagen is considering a proposal to manufacture e-scooters for the Phoenix region. The project requires use of an existing warehouse, which the firm acquired three years ago for $2 million and which it currently rents out for $150,000 per year. Rental rates are not expected to change going forward. In addition to using the warehouse, the project requires an upfront investment into machines and other equipment of $1.3 million. This investment can be fully depreciated straight-line over the next 10 years for tax purposes. However, the company expects to terminate the project at the end of eight years and to sell the machines and equipment for $550,000. Finally, the project requires an initial investment into net working capital equal to 10 percent of predicted first-year sales. Subsequently, net working capital remains at 10 percent of the predicted sales over the following year. Sales of e-scooters are expected to be $4.8 million in the first year and to stay constant for eight years. Total manufacturing costs and operating expenses (excluding depreciation) are 80 percent of sales, and profits are taxed at 30 percent. a) What is the free cash flow of the project today (t=0)? [1 point) b) What is the annual amount of depreciation of the equipment and machines? [1 point] c) What is the net income of the project in years 1 through 7? What is the free cash flow of the project in years 1 through 7 [2 points) d) What is the after-tax cash flow of selling the machines and equipment in year 8? [2 points) e) What is the free cash flow of the project in year 8? [3 points) f) If the cost of capital is 15%, what is the NPV of the project? [3 points) Note: Show your work