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(Calculating free cash flows​) At​ present, SolartechSkateboards is considering expanding its product line toinclude​gas-powered skateboards;​ however, it is questionable howwell they will be received by skateboarders. Although you feelthere is a 50 percent chance you will sell 12,000 of these per yearfor 10 years​ (after which time this project is expected to shutdown because​ solar-powered skateboards will become more​ popular),you also recognize that there is a 25 percent chance that you willonly sell 2,000 and also a 25 percent chance you will sell 17,000.The gas skateboards would sell for $130 each and have a variablecost of ​$50 each. Regardless of how many you​ sell, the annualfixed costs associated with production would be $160,000. In​addition, there would be an initial expenditure of $1,100,000associated with the purchase of new production equipment. It isassumed that this initial expenditure will be depreciated using thesimplified​ straight-line method down to zero over 10 years.Because of the number of stores that will need​ inventory, theworking capital requirements are the same regardless of the levelof sales. This project will require a​ one-time initial investmentof $60,000 in net working​ capital, and that​ working-capitalinvestment will be recovered when the project is shut down.​Finally, assume that the​ firm's marginal tax rate is 31percent.

a. What is the initial outlay associated with the​ project?

b. What are the annual free cash flows associated with theproject for years 1 through 9 under each sales​ forecast? What arethe expected annual free cash flows for years 1 through​ 9?

c. What is the terminal cash flow in year 10​ (that is, what isthe free cash flow in year 10 plus any additional cash flowsassociated with the termination of the​ project)?

d. Using the expected free cash​ flows, what is the​ project'sNPV given a required rate of return of 8 percent? What would the​project's NPV be if 12,000 skateboards were​ sold?