8 Question 35 (4 points) Johnson Inc. finally decided to undertake an expansion project which involved $2 million of R&D expenses in the previous two years before the project. The necessary equipment could be purchased for $9 million, and the project would also require an initial $3 million investment in net operating working capital and $0.5 million for installation and testing. What is the project's initial investment outlay? (Chapter 11) 14 million 12.5 million 14.5 million 12 million 11.5 million Question 36 (6 points) Continued from the above question, the firm also wants to estimate the first year operating free cash flow (at t=1) for the project. The following information is collected: (Chapter 11) Projected sales $10 million Operating costs 7 million Capital cost allowance 2 million Interest expense in year one 1 million Additional capital expenditure in year one 1 million Additional material inventory cost in year one 0.5 million What is the project's free cash flow for the first year if the firm's tax rate is 28%? 2.75 million 3.25 million 0.56 million 4.5 million 1.22 million