Comprehensive Problem 2 (CF, WACC, Ke CAPM, beta) The Amex Manufacturing Ltd is considering a new investment. Financial projections for the investment are tabulated below. Corporate tax is 30%. 0 1 2 3 4 5 Investment 30,000 Sales Revenue 11000 6000 14000 15000 16000 Operating cost 25% of the sales revenue Depreciation 5000 5000 5000 5000 5000 Sunk Cost 5600 (3.a) Determine the cash flows of project for different years. (3.b) The company has issued 5 bonds with its face value tk. 1000 each. The before tax YTM of bondholders is 8.5%. In addition, the company also issued 1000 shares with tk. 25 per share (Po) in DSE for financing the project. The scenario analysis of the DSE return and stock return is follows: Probability Stock Return DSE Return Economic condition Recession 0.35 -9% -4% Normal 0.50 16 8 Boom 0.15 27 18 If the risk free rate of return is 6%, calculate WACC of the company and NPV of the project, and evaluate the project based on the NPV.