The projected costs for a new plant are given below (all numbers are in RM million)
Land Cost = 7.5 FCI = 120 (60 at end of year 1,
39.6 at end of year 2, 20.4 at end of year 3)
Working capital, WC = 35 at start-up Revenue,
R = 52 COM (without depreciation) = 18
Tax rate = 40%
Depreciation method = Current MACRS over 5 years
Project life = 10 years after start-up
Internal rate of return = 9.5% p.a
(a) Draw a cumulative (nondiscounted) after tax cash flow diagram.
(b) From part (a), calculate the following nondiscounted profitability criteria for the project i. Cumulative Cash Position (CCP) = 132 and Cumulative Cash Ratio (CCR) = 1.81 ii. Payback Period (PBP) = 4.0 years iii. Rate of Return on Investment (ROROI) = 11%
(c) Draw a cumulative (discounted) after tax cash flow diagram (d) From part (c), calculate the following nondiscounted profitability criteria for the project i. Net present value (NPV) = 1.71 and Net Present Value Ratio (PVR) = 1.01 ii. Discounted Payback Period (DPBP) = 6.7 iii. Discounted Cash Flow Rate of Return (DCFROR) = 9.73%
Repeat the above problem using a straight-line depreciation method over 7 years.