$$$$Crystal Water, a community committed to raise awareness towards water pollution in big cities, permission approved to install CCC an innovation water cleaning device. Administrative costs to obtain the permission were RM$1,000$ and were incurred in the previous year.  

 

The device, that will be acquired and installed today, costs RM$10,000$ with annual operating expenses of RM$3,000$ and is expected to operate for two years. It will be depreciated in four years using the straight$-$line depreciation method. The salvage value before taxes of the device will be RM$6,000$ two years from now.

The total waste collected over a year can be recycled and sold at RM$8,000($revenues$).$ Working capital is $10\%$ of next year revenues. The discount rate is $10\%$ and the marginal tax rate is $30\%.$

Calculate the project$$s;

$($i$)$ Free cash flow from year $0$ to $2.$

$(11$ marks$)$

$($ii$)$ Net present value $($NPV$).$

$(4$ marks$)$

Answer rating: 100% (QA)

Crystal Water Project Evaluation Project Analysis Free Cash Flow FCF and Net Present Value NPV Year ... View the full answer