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 yourdesk, and complains, "We owe these consultants $1.8 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): Project Year Earnings Forecast 15 million) 1 2 10 Sales revenue 35.000 35.000 35.000 35.000 - Cost of goods sold 21.000 21.000 21 000 21 000 = Gross proft 14 000 14.000 14 000 14.000 -Selling, general, and administrative expenses 1.840 1.840 1.840 1.840 -Depreciation 2.300 2.300 2.300 2.300 = Nel operating income 9.880 9.860 9.860 9.860 -Income tax 3451 3.451 3.451 3.451 Net univered Income 6.409 5.400 6409 5.400 All of the estimates in the report seem correct. You note that the consultants used straight-line depreciation for the ne is worth $64.09 milion You Think back to your halcyon days in finance class and realize there is more work to be dor 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 ol, which is what the accounting department recommended. The report concludes that because the project will increase earnings by $6.409 million per year for ten years, the project is worth $64.09 million. You think back to your halcyon days in finance class and realize 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 million in working capital upfront year 0], which will be fully recovered in year 10. Next, you see they have attributed $1.84 million of seling, general and administrative expenses to the project, but you know that $0.92 milion 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. Given the available information, what are the free cash flows in years through 10 that should be used to evaluate the proposed project? b. If the cost of capital for this project is 8%, what is your estimate of the value of the new project