+ re You are a manager at Northern Fibre, which is considering expanding its operations in synthetic fibre manufacturing Your boss comes into your office, drops a consultants 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 $25 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) Sales revenue -Cost of goods sold = Gross profit - General, sales, and administrative expenses Depreciation Net operating income -Income tax Net income 1 33,000 19.800 13.200 2.000 2,500 8.7000 3.045 5.655 2 33.000 19,800 13.200 2.000 2.500 8,7000 3.045 5.655 www. 9 33.000 19.800 13.200 2.000 2.500 8.7000 3.045 5.655 10 33.000 19 800 13 200 2000 2.500 8.7000 3.045 5655 4 1 15 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 today (year 0), which is what the accounting department recommended for financial reporting purposes. CRA allows a CCA rate of 20% on the equipment for tax purposes. The report concludes that because the project will increase earnings by $5 655 million per year for ten years, the project is worth $56.55 million You think back to your glory days in finance class and realize there is more work to be donel 19 1 b. if the cost of capital for this project is 13%, what is your estimate of the value of the new project? Value of project million (Round to three decimal places) ation stion I stion