The CFO of a company in a high-risk industry (asset beta of 1.275 ) has hired you to estimate the present value of cash outflows spent on raw materials for the next 10 years which includes both fixed and variable components. The company has entered into a fixed-price contract with a raw material supplier at 510mn per year from year 3 to year 9 . In addition to fixed cosis, variable cash outflow for purchasing other raw materials averages to $10mn per year from year 1 to year 10 , but these outflows are highly risky. The CFO is unsure how risk should be accounted for, especially because she is dealing with outflows instead of inflows. If high risk means higher discount rates, then the CFO wonders whether high risk of outflows means she should worry less about them (because present values of outflows will be lower)? This doesn't sound right to her. To complicate matters, there are various discount rates to choose from. Debtholders in the company receive a 2% premium over U.S. Treasury bonds and the debt beta is 0.15. Treasury bonds yield 3% return. Equity investors believe 25% is the expected return from investing in other equity securities of similar risk. Assume the marginal tax rate is zero. What is your best estimate of the present value of total raw material costs? [For partial credit, explain your thought process even if you don't get to the final answer]