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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 $1.1 million for this report, and I am not sure their analysis makes sense. Before we spend the $26 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): (Click on the lcon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Project Year Earnings Forecast ($ million) 10 26.000 26.000 15.600 26.000 Sales revenue 26.000 - Cost of goods sold = Gross profit 15.600 15.600 15.600 10.400 10.400 10.400 10.400 2.080 2.080 Selling, general, and administrative expenses Depreciation 2.080 2.080 2.600 2.600 2.600 2.600 = Net operating income 5.720 5.720 5.720 5.720 The free cash flow for year 0 is () million. The free cash flow for year 1 to 9 is () million. The free cash flow for year 10 is ( ) million. b. If the cost of capital for this project is 11%, whats your estimate of the value of the new project? The value of project is () million. Year Free Cash Flow 10 = Net unlevered income + Overhead (after tax at 35%) + Depreciation - CapEx - Inc. in NWC Free Cash Flow 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 $1.1 million for this report, and I am not sure their analysis makes sense. Before we spend the $26 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): (Click on the lcon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Project Year Earnings Forecast ($ million) 10 26.000 26.000 15.600 26.000 Sales revenue 26.000 - Cost of goods sold = Gross profit 15.600 15.600 15.600 10.400 10.400 10.400 10.400 2.080 2.080 Selling, general, and administrative expenses Depreciation 2.080 2.080 2.600 2.600 2.600 2.600 = Net operating income 5.720 5.720 5.720 5.720 The free cash flow for year 0 is () million. The free cash flow for year 1 to 9 is () million. The free cash flow for year 10 is ( ) million. b. If the cost of capital for this project is 11%, whats your estimate of the value of the new project? The value of project is () million. Year Free Cash Flow 10 = Net unlevered income + Overhead (after tax at 35%) + Depreciation - CapEx - Inc. in NWC Free Cash Flow