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 $19 million for this report and I am not sure the analysis makes sense Before we spend the $29 million on new equipment needed for this project, look it over and give me your opinion. You open the report and find the following estimates in millions of dollars) Sales revenue Cost of goods sold Gross profit General, sales, and administrative expenses Depreciation Net operating income Income tax 1 28.000 16 800 11.200 2320 2.900 59800 2.093 2 28 000 16.800 11 200 2320 2.900 5 9800 2093 9 28 000 16 800 11 200 2320 2.900 5.9800 2.093 10 28.000 16 800 11 200 2320 2.900 59800 2093 b. If the cost of capital for this project is 16%, what is your estimate of the value of the new project? Value of project=$ million (Round to three decimat places) Not operating income 5.9800 5.0800 5 9800 5.9800 Income tax 2093 2093 2003 2003 Net Income 3887 3 887 3887 3887 All of the estimates in the report scom correct You note that the consultants used straight line depreciation for the new equipment that will be purchased today (year o), which is what the accounting department recommended for financial reporting purposes CRA allows a CCA rate of 30% on the oquipment for tax purposes. The report concludes that because the project will increase earnings by $3.687 milion per year for ten years, the project is worth $.38 87 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 513 milon in working capital up hiont (your) which will be fully recovered in year 10. Next you see they have attributed $232 million of seling general and administrative expenses to the project, but you know that $1 16 million or 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 b. If the cost of capital for this project is 16%, what is your estimate of the value of the new project? b If the cost of capital for this project is 16%, what is your estimate of the value of the new project? Value of project = $million (Round to three decimal places)