X P 9-31 (book/static) Question Help 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 $1.3 million for this report, and I am not sure their analysis makes sense. Before we spend the $19.6 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): Project Year Earnings Forecast 1 2 . . . 9 10 Sales Revenue 32.000 32.000 32.000 32.000 - Cost of Goods Sold 19.200 19.200 19.200 19.200 = Gross Profit 12.800 12.800 12.800 12.800 - General, Sales and Administrative Expenses 1.568 1.568 1.568 1.568 - Depreciation 1.960 1.960 1.960 1.960 = Net Operating Income 9.272 9.272 9.272 9.272 - Income Tax 3.245 3.245 3.245 3.245 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 $ - 27.800 million. (Round to three decimal places.) The free cash flow for years 1 to 9 is $ 8.497 million. (Round to three decimal places.) The free cash flow for year 10 is $ 16.697 million. (Round to three decimal places.) b. If the cost of capital for this project is 13%, what is your estimate of the value of the new project? If the cost of capital for this project is 13%, the value of the project is $ 20.722 million. (Round to three decimal places.) You should accept the project. (Choose from the drop-down menu.)