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Question 6 (Capital Budgeting) You are a financial manager for BPI Inc, and are asked to evaluate a potential investment opportunity by the senior manager of the R&D division. Key information about the project is given in the table below. Additional Information is as follows: The project won't generate any revenues, costs of goods sold, or SGSA expenses after year 3. It will take a team of 10 engineers 3 months to get the project started. Engineers at BPI are typically paid upfront for projects and the average monthly salary of an engineer working for OPI Is $8,500. The salary of the engineers is considered an R&D expense The project will require an upfront investment in additional machinery of $600,000 today. The machinety will be deprecated over 4 years usine straight line depreciation starting at the end of year 1 in year the machinery will need to be disposed of which will generate a disposal cost of $50,000 that can be expensed for tax purposes The marginal tax rate of BPI is 21% and BPt as a firm is expected to generate at least 510 million of pre tax income each year for the next six years, regardless of whether it takes the new project or not The appropriate interest rate to discount free cash flow is 11% A midyear adjustment is not necessary to get more information about the project you have a meeting with the senior manager of the R&D division. In that meeting you learn that the R&D division has already built a prototype for this project in order to determine its feasibility and that the prototype cost $200,000 to develop. Moreover, you are being told that i will not hire additional engineers but will use in-house nincers that are currently employed by PL The senior manager of R&D claims that using in-house engineers will help increase the profitability of the project ince they are already on the company's payroll Part A (15 Points) Complete the Table below to calculate the free cash flow of the project no discounting necessary). Add any additional tine tems that you think are relevant to calculate free cash flows. Round your numbers to the nearest integer in $1,000) to save some space. Financial Forecasts for the New Project in ($ 1,000) Year: 0 1 2 3 4 Revenues 1,500 2,000 2,500 Cost of Goods Sold (800) (1,200) (1,300) SG&A Expense (200) (150) (100) EBIT Taxes NOPAT 0 Net Working Capital 150 200 250 0 FCF