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 $1.7 million for this report, and I am not sure their analysis makes sense. Before we spend the $25 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): (Click on the following icon in order to copy its contents into a spreadsheet.) Earnings Forecast ($ million) Sales revenue - Cost of goods sold = Gross profit - Selling, general, and administrative expenses - Depreciation = Net operating income - Income tax 1 27.000 16.200 10.800 2.000 2.500 6.300 1.26 Project Year 2 27.000 16.200 10.800 2.000 2.500 6.300 1.26 9 27.000 16.200 10.800 2.000 2.500 6.300 1.26 10 27.000 16.200 10.800 2.000 2.500 6.300 1.26 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. (Round to three decimal places and enter a decrease as a negative number.) The free cash flow for years 1 to 9 is $0 million. (Round to three decimal places and enter a decrease as a negative number.) The free cash flow for year 10 is $ million. (Round to three decimal places and enter a decrease as a negative number.) b. If the cost of capital for this project is 10%, what is your estimate of the value of the new project? The value of the project is $ million. (Round to three decimal places.) 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 $1.7 million for this report, and I am not sure their analysis makes sense. Before we spend the $25 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): (Click on the following icon in order to copy its contents into a spreadsheet.) Earnings Forecast ($ million) Sales revenue - Cost of goods sold = Gross profit - Selling, general, and administrative expenses - Depreciation = Net operating income - Income tax 1 27.000 16.200 10.800 2.000 2.500 6.300 1.26 Project Year 2 27.000 16.200 10.800 2.000 2.500 6.300 1.26 9 27.000 16.200 10.800 2.000 2.500 6.300 1.26 10 27.000 16.200 10.800 2.000 2.500 6.300 1.26 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. (Round to three decimal places and enter a decrease as a negative number.) The free cash flow for years 1 to 9 is $0 million. (Round to three decimal places and enter a decrease as a negative number.) The free cash flow for year 10 is $ million. (Round to three decimal places and enter a decrease as a negative number.) b. If the cost of capital for this project is 10%, what is your estimate of the value of the new project? The value of the project is $ million. (Round to three decimal places.)