You are a manager at Percolated Fiber, which is considering expanding its operations in synthetic fiber manufacturing. Your boss comes into your office, drops a consultant's report on your desk, and complains, "We owe these consultants $1.6 million for this report, and I am not sure their analysis makes sense. Before we spend the $19 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):

a. Given the available information, what are the free cash flows in years 0 through 10 that should be used to evaluate the proposed project?

The free cash flow for year 0 is $______ million.

b. If the cost of capital for this project is 9 % what is your estimate of the value of the new project?

A D E F G B Project Year 1 2 .. 9 10 . 32 32 32 32 19.2 19.2 12.8 12.8 1 2 Earnings Forecast ($000,000s) 3 Sales revenue 4 - Cost of goods sold 5 Error: Error evaluating expression: Gross profit 6 - Selling, general, and administrative expenses 7 - Depreciation 8 Error: Error evaluating expression: Net operating income 9 - Income tax 10 Error: Error evaluating expression: Net unlevered income 11 19.2 12.8 1.52 1.9 19.2 12.8 1.52 1.52 1.52 1.9 1.9 1.9 9.38 9.38 1.876 7.504 9.38 1.876 9.38 1.876 1.876 7.504 7.504 7.504 12 13