In connection with the Internal Revenue Service’s (IRS) examination of Ball’s consolidated income tax returns for the tax years 2000 through 2004, the IRS has proposed to disallow Ball’s deductions of interest expense incurred on loans under a company-owned life insurance plan that has been in place for more than 20 years.
Ball believes that its interest deductions will be sustained as filed and, therefore, no provision for loss has been recorded.
The total potential liability for the audit years 1999 through 2004, unaudited year 2005 and an estimate of the impact on 2006 is approximately $31 million, excluding related interest.
The IRS has withdrawn its proposed adjustments for any penalties.
See Note 13 accompanying the consolidated financial statements within Item 8 of this Annual Report.
Results of Equity Affiliates Equity in the earnings of affiliates in 2006 is primarily attributable to our 50 percent ownership in packaging investments in the U. S.  and Brazil.
Earnings in 2004 included the results of a minority-owned aerospace business, which was sold in October 2005, and a $15.2 million loss representing Ball’s share of a provision for doubtful accounts relating to its 35 percent interest in Sanshui JFP (discussed above in “Metal Beverage Packaging, Europe/Asia”).
After consideration of the PRC loss, earnings were $14.7 million in 2006 compared to $15.5 million in 2005 and $15.8 million in 2004.
CRITICAL AND SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS For information regarding the company’s critical and significant accounting policies, as well as recent accounting pronouncements, see Note 1 to the consolidated financial statements within Item 8 of this report.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Cash Flows and Capital Expenditures Cash flows from operating activities were $401.4 million in 2006 compared to $558.8 million in 2005 and $535.9 million in 2004.
Management internally uses a free cash flow measure: (1) to evaluate the company’s operating results, (2) for planning purposes, (3) to evaluate strategic investments and (4) to evaluate the company’s ability to incur and service debt.
Free cash flow is not a defined term under U. S.  generally accepted accounting principles, and it should not be inferred that the entire free cash flow amount is available for discretionary expenditures.
The company defines free cash flow as cash flow from operating activities less additions to property, plant and equipment (capital spending).
Free cash flow is typically derived directly from the company’s cash flow statements; however, it may be adjusted for items that affect comparability between periods.
An example of such an item included in 2006 is the property insurance proceeds for the replacement of the fire-damaged assets in our Hassloch, Germany, plant, which is included in capital spending amounts.
Based on this, our consolidated free cash flow is summarized as follows:
## Table 0 ##
Cash flows from operating activities in 2006 were negatively affected by higher cash pension funding and higher working capital levels compared to the prior year.
The higher working capital was a combination of higher than planned raw material inventory levels, higher income tax payments and higher accounts receivable balances, the latter resulting primarily from the repayment of a portion of the accounts receivable securitization program and late payments from customers in Europe.
Management expects the increase in working capital to be temporary and that working capital levels will return to normal levels by the end of the first half of 2007.
D. R.  HORTON, INC.  AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 101 NOTE K – COMMITMENTS AND CONTINGENCIES Warranty Claims The Company provides its homebuyers with warranties for defects in structural elements, mechanical systems and other construction components of the home.
Warranty liabilities are established by charging cost of sales for each home delivered based on management’s estimate of expected warranty-related costs and by accruing for existing warranty claims.
The Company’s warranty liability is based upon historical warranty cost experience in each market in which it operates and is adjusted to reflect qualitative risks associated with the types of homes built and the geographic areas in which they are built.
The estimation of these costs is subject to a high degree of variability due to uncertainties related to these factors.
Due to the high degree of judgment required in establishing the liability for warranty claims, actual future costs could differ significantly from current estimated amounts, and it is not possible for the Company to make a reasonable estimate of the possible loss or range of loss in excess of its warranty liability.
Changes in the Company’s warranty liability during fiscal 2018 and 2017 were as follows:
## Table 1 ##
The change in liabilities for pre-existing warranties was $49.3 million and $30.0 million in fiscal 2018 and 2017, respectively.
These amounts reflect the Company’s ongoing efforts to improve its customer service and relations, which in many cases results in the performance of warranty service after the original warranty period has expired.
The Company has increased the amount of its warranties issued as a percentage of home cost of sales to reflect this increase in warranty costs.
Legal Claims and Insurance The Company is named as a defendant in various claims, complaints and other legal actions in the ordinary course of business.
At any point in time, the Company is managing several hundred individual claims related to construction defect matters, personal injury claims, employment matters, land development issues, contract disputes and other matters.
The Company has established reserves for these contingencies based on the estimated costs of pending claims and the estimated costs of anticipated future claims related to previously closed homes.
The estimated liabilities for these contingencies were $408.1 million and $420.6 million at September 30, 2018 and 2017, respectively, and are included in accrued expenses and other liabilities in the consolidated balance sheets.
Approximately 99% and 98% of these reserves related to construction defect matters at September 30, 2018 and 2017, respectively.
Expenses related to the Company’s legal contingencies were $41.0 million, $87.8 million and $49.6 million in fiscal 2018, 2017 and 2016, respectively.
The Company’s reserves for construction defect claims include the estimated costs of both known claims and anticipated future claims.
As of September 30, 2018, no individual existing claim was material to the Company’s financial statements.
The Company has closed a significant number of homes during recent years and may be subject to future construction defect claims on these homes.
Although regulations vary from state to state, construction defect issues can generally be reported for up to ten years after the home has closed in many states in which the Company operates.
Historical data and trends regarding the frequency of claims incurred and the costs to resolve claims relative to the types of products and markets where the Company operates are used to estimate the construction defect liabilities for both existing and anticipated future claims.
These estimates are subject to ongoing revision as the circumstances of individual pending claims and historical data and trends change.
Adjustments to estimated reserves are recorded in the accounting period in which the change in estimate occurs.
## Table 2 ##
(1) Cancellation rate represents the number of cancelled sales orders divided by gross sales orders.
Net Sales Orders 2018 versus 2017 The value of net sales orders increased 13% to $15.8 billion (52,740 homes) in 2018 from $13.9 billion (46,605 homes) in 2017, with increases in all of our regions.
The increases in the value of sales orders were due to increased volume.
The average selling price of homes sold during fiscal 2018 was $298,800, essentially unchanged from the prior year.
The number of net sales orders increased 13% during 2018 compared to 2017.
The increase in net sales orders reflects the strength in demand in most of our markets, particularly at affordable price points.
Our Chicago and Phoenix markets contributed the most to higher sales volumes in our Midwest and Southwest regions, respectively.
Our sales order cancellation rate (cancelled sales orders divided by gross sales orders for the period) was 22% in both years.
We believe our business is well positioned to continue to generate increased sales volume; however, our future sales volumes will depend on new home demand in each of our operating markets and our ability to successfully implement our operating strategies.2017 versus 2016 The value of net sales orders increased 16% to $13.9 billion (46,605 homes) in 2017 from $12.0 billion (40,814 homes) in 2016, with increases in all of our regions.
The increase in the value of sales orders was due to increased volume and to a lesser extent, increased selling prices in some regions.
The number of net sales orders increased 14%, and the average price of net sales orders increased 2% to $299,100 during 2017 compared to 2016.
Our Phoenix and Carolina markets contributed the most to higher sales volumes in our Southwest and East regions, respectively.
Our sales order cancellation rate was 22% in 2017 compared to 23% in 2016.
D. R.  HORTON, INC.  AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 89 The Company’s homebuilding revolving credit facility imposes restrictions on its operations and activities, including requiring the maintenance of a maximum allowable ratio of debt to tangible net worth and a borrowing base restriction if the Company’s ratio of debt to tangible net worth exceeds a certain level.
These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly.
A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity.
The credit agreement governing the facility and the indenture governing the senior notes also impose restrictions on the creation of secured debt and liens.
At September 30, 2018, the Company was in compliance with all of the covenants, limitations and restrictions of its homebuilding revolving credit facility and public debt obligations.
The Company has an automatically effective universal shelf registration statement filed with the Securities and Exchange Commission (SEC) in August 2018, registering debt and equity securities that the Company may issue from time to time in amounts to be determined.
In December 2017, the Company issued $400 million principal amount of 2.55% senior notes due December 1, 2020, with interest payable semi-annually.
The notes represent unsecured obligations of the Company.
In December 2017, the Company redeemed $400 million principal amount of its 3.625% senior notes due February 2018.
The senior notes were redeemed at a price equal to 100% of the principal amount of the notes, together with accrued and unpaid interest.
The key terms of the Company’s homebuilding senior notes outstanding as of September 30, 2018 are summarized below.

<table><tr><td>($ in millions)</td><td>2006</td><td>2005</td><td>2004</td></tr><tr><td>Cash flows from operating activities</td><td>$401.4</td><td>$558.8</td><td>$535.9</td></tr><tr><td>Capital spending</td><td>-279.6</td><td>-291.7</td><td>-196.0</td></tr><tr><td>Proceeds for replacement of fire-damaged assets</td><td>61.3</td><td>–</td><td>–</td></tr><tr><td>Free cash flow</td><td>$183.1</td><td>$267.1</td><td>$339.9</td></tr></table>
<table><tr><td></td><td colspan="2">September 30,</td></tr><tr><td></td><td>2018</td><td>2017</td></tr><tr><td></td><td colspan="2">(In millions)</td></tr><tr><td>Warranty liability, beginning of year</td><td>$143.7</td><td>$104.4</td></tr><tr><td>Warranties issued</td><td>81.6</td><td>69.7</td></tr><tr><td>Changes in liability for pre-existing warranties</td><td>49.3</td><td>30.0</td></tr><tr><td>Settlements made</td><td>-72.6</td><td>-60.4</td></tr><tr><td>Warranty liability, end of year</td><td>$202.0</td><td>$143.7</td></tr></table>
<table><tr><td></td><td colspan="9">Sales Order Cancellations Fiscal Year Ended September 30,</td></tr><tr><td></td><td colspan="3">Cancelled Sales Orders</td><td colspan="3">Value (In millions)</td><td colspan="3">Cancellation Rate -1</td></tr><tr><td></td><td>2018</td><td>2017</td><td>2016</td><td>2018</td><td>2017</td><td>2016</td><td>2018</td><td>2017</td><td>2016</td></tr><tr><td>East</td><td>2,031</td><td>1,818</td><td>1,582</td><td>$570.0</td><td>$500.3</td><td>$425.4</td><td>23%</td><td>23%</td><td>24%</td></tr><tr><td>Midwest</td><td>299</td><td>260</td><td>241</td><td>115.1</td><td>103.6</td><td>91.6</td><td>12%</td><td>12%</td><td>12%</td></tr><tr><td>Southeast</td><td>5,655</td><td>4,898</td><td>4,413</td><td>1,502.5</td><td>1,252.5</td><td>1,105.9</td><td>25%</td><td>24%</td><td>24%</td></tr><tr><td>South Central</td><td>4,408</td><td>3,989</td><td>3,795</td><td>1,091.9</td><td>1,000.8</td><td>942.5</td><td>22%</td><td>23%</td><td>23%</td></tr><tr><td>Southwest</td><td>1,031</td><td>864</td><td>745</td><td>251.8</td><td>196.9</td><td>160.4</td><td>24%</td><td>24%</td><td>30%</td></tr><tr><td>West</td><td>1,378</td><td>1,221</td><td>1,119</td><td>661.3</td><td>616.9</td><td>544.7</td><td>15%</td><td>15%</td><td>15%</td></tr><tr><td></td><td>14,802</td><td>13,050</td><td>11,895</td><td>$4,192.6</td><td>$3,671.0</td><td>$3,270.5</td><td>22%</td><td>22%</td><td>23%</td></tr></table>

Question: What will Value of the total Cancelled Sales Orders be like in 2019 if it develops with the same increasing rate as current? (in million)
Answer: 4788.31238