S3. Smith Co. is considering a project to expand its product line. Due to intense competition, incremental sales will be for two years only. Relevant data: Rewenues. Average unit price is $10 First year estimated sales quantity of new product is 2,000 units. New sales quantity is expected to increase 5% the second year. New products cannibalize $3.000 in sales of existing product each year. Costs. Gross profit margin is 40% for new product and 30% for existing product. Corporate tax rate TC = 40%. Net Working Capital Requirements. Receivables average 12% of revenue. All receiv- ables are eventually collected. Payables average 10% of Cost of Goods Sold. All payables are eventually paid. Inventory costs average 8% of Cost of Goods Sold. Inventory costs each year will be taken begin-of-year and all inventory will be used. Capital Expenditures. Acquisition price of new machines is $6,000. For tax purposes, the machines will be classified as 5-yr property and straight-line depreciation to zero salvage value will be used. The machine's expected salvage value at the end of the second year is $2,600. Determine the project's (a) incremental earnings (net income), (b) net working capital requirements, and (c) free cash flows. Use the standard spreadsheet format