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 $$1\mathrm{.}500$ million for this report, and I am not sure their analysis makes sense. Before we spend the $$26\mathrm{.}600$ 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$)$:

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. They also calculated the depreciation assuming no salvage value for the equipment. The report concludes that because the project will increase earnings by $$6\mathrm{.}013$

million per yea

First, you note

have attributed

accepted. Fine

Data table

ore work to be done!

a$.$ Given the a

b$.$ If the cost $o$

$($Click on the following icon $$ in order to copy its contents into a spreadsheet.$)$

a$.$ Given the a

$,$ which will be fully recovered in year $10.$ Next, you see they

unt is overhead that will be incurred even if the project is not

ct$?$

The free cash