Consider the following project details: Two Year Manufacturing Project Data Project life 2 years $10m $3m Initial investment in equipment Annual depreciation of equipment Number of units produced per year Selling price per unit Variable cost per unit 80,000 $120 $50 $0.6m Fixed costs per year 30% Tax rate Notes 1. Due to the project, current assets (mostly inventory) will grow by $3m initially (at t=0), and then by $0.7m at the end of the first year (t=1). Current liabilities (mostly trade creditors) will increase by $0.6m at time zero, and then by $0.5m at the end of the first year (t=1). At the end of the project, the net working capital accumulated due to the project can be sold for the same price that it was bought. 2. Consulting fees of $6,000 were paid six months ago. This relates directly to the project. 3. The factory building was purchased 40 years ago for $8m and is currently being rented to another company for $0.3m per year. The factory building is fully depreciated for tax purposes. The tenant will need to vacate the factory if this project is undertaken. 4. The equipment will have a book value of $4m at the end of the project for tax purposes. However, the equipment is expected to fetch $3.5 million when it is sold at t=2. 2. Consulting fees of $6,000 were paid six months ago. This relates directly to the project. 3. The factory building was purchased 40 years ago for $8m and is currently being rented to another company for $0.3m per year. The factory building is fully depreciated for tax purposes. The tenant will need to vacate the factory if this project is undertaken. 4. The equipment will have a book value of $4m at the end of the project for tax purposes. However, the equipment is expected to fetch $3.5 million when it is sold at t=2. Assumption All cash flows occur at the start or end of the year as appropriate, not in the middle or throughout the year. Which of the following statements is NOT correct? O a. The opportunity cost of using the building for this project is $0.3m O b. Change in Net Working Capital (ANWC) at time 2 is - $2.6m O c. Time zero firm free cash flow is -$12.4m O d. Net Income at time 1 is $1.4m O e. Capital Expenditure (Capex) at time 2 is $3,350,000