Problem 25 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 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 thousands of dollars): Project War 1 2 9 10 Sales revenue 30.000 30.000 30.000 30.000 - Cost of goods sold 18.000 18.000 13.000 13,000 = Gross prot 12.000 12.000 12.000 12.000 - General. 5310:. and administrative expenses 2.000 2.000 2.000 2.000 : papmciauon 2.590 2.990 2590 2.509 = Net operating income 7500 7,500 7.500 7.500 u Income tax 2,625 2.625 2.625 2.625 Nm Income 4875 4.875 4,875 4.875 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, which is the company's assumption in this case. The report concludes that because the project will increase earnings by $4.875 million per year for 10 years, the project is worth $48.75 million. You think back to your glory 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 $10 million in working capital upfront (year 0), which will be fully recovered in