A$4,$ Inc. is considering setting up a new paper mill at a cost of $$100$ million. It is expected to stay

economical for $5$ years after which the company expects to upgrade to a more efficient technology and

sell it for $$30$ million. Following is an extract from a report prepared by the marketing department and

engineering department. All amounts are in million USD.

A tax rate of $30\%$ is applicable to both income and gains and is not expected to change in $5$ years. Tax

code requires the company to depreciate the plant over $5$ years with $$10$ million salvage value. A discount

rate of $8\%$ is appropriate. Calculate NPV$.$ Consider tax implications. Use Straight line depreciation.

Year

Revenue inflows

Costs outflows

Net cash flows

before tax