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 consultant's report on your desk, and complains "We owe these consultants $14 million for this report and I am not sure their analysis makes sense Before we spend the $23 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) 1 2 9 10 Sales revenue 31.000 31.000 31 000 31 000 - Cost of goods sold 18 600 18.600 18.600 18 600 Gross profit 12 400 12.400 12 400 12.400 General sales, and administrative expenses 1 840 1 840 1 840 1840 -Depreciation 2300 2.300 2.300 2.300 - Net operating income 8 2600 8 2600 8.2000 8 2600 - Income tax 2 891 2 891 2 891 2.891 Net income 5 369 5369 5 369 5.369 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 30% on the equipment for tax purposes The report concludes that because the project will increase earnings by S5 369 million per year for ten years, the project is worth $53 69 million You think back to your glory days in finance class and realize there is more work to be donel First you note that the consultants have not factored in the fact that the project will require S11 million in working capital up front (year 0), which will be fully recovered in year 10 Next you see they have attributed 51 84 million of selling general and administrative expenses to the project, but you know that $0 92 million of this amount is overhead that will be incurred even if the project is not accepted Finally, you know that accounting earings are not the night thing to focus on b If the cost of capital for this project is 12% What is your estimate of the value of the new project? bit the cost of capital for this project is 12% what is your estimate of the value of the new project? Value of project sillon (Round to three decimal places