You are a manager at Aston Martin, which is considering expanding its operations in synthetic fibre manufacturing. Your boss comes into your office, drops a consultant's report on your desk, and complains, "We owe these consultants 1 million for this report, and I am not sure their analysis makes sense. Before we spend the 29.7 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):

Project year
Earnings forecast	1	2	...	9	10
Sales revenue	25.000	25.000		25.000	25.000
- Cost of goods sold	15.000	15.000		15.000	15.000
= Gross profit	10.000	10.000		10.000	10.000
- General, sales and administrative expenses	2.176	2.176		2.176	2.176
- Depreciation	2.97	2.97		2.97	2.97
= Net operating profit	4.854	4.854		4.854	4.854
- Income tax	1.531	1.531		1.531	1.531
= Net profit	3.323	3.323		3.323	3.323

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() ), which is what the accounting department recommended. They also calculated the depreciation assuming no salvage value for the equipment, which is the company's assumption in this case. The report concludes that because the project will increase earnings by 3.323 million per year for ten years, the project is worth 33.23 million. You think back to your glory days in finance class and realise there is more work to be done!

First, you note that the consultants have not factored in the fact that the project will require 8.1 million in net working capital up front (year ()), which will be fully recovered in year 10 . Next, you see they have attributed 2.176 million of selling, general and administrative expenses to the project, but you know that 1.052 million of this amount is overhead that will be incurred even if the project is not accepted. Finally, you know that accounting earnings are not the right thing to focus on!

(a) The free cash flow for year 0 is ? million. (Round your answer to three decimal places)

The free cash flow for years 1 to 9 is ? million. (Round your answer to three decimal places)

The free cash flow for year 10 is ? million. (Round your answer to three decimal places)

(b) If the cost of capital for this project is 14.4%, the value of the project is ? million. (Round your answer to three decimal places)

You should not accept the project. True or False?