Part I: Com ulso ' estion 25 marks A Canadian company is presently considering undertaking a mining project to extract soda ash. The company expects to produce 3011.111131] tons of soda ash armually in 213121. This will meet the present annual demand in Canada. The total cost of buying the soda ash mine is $4m. This will be paid 55213113111 now {31 December, 213119) and $2m on 31 December, 2021]. The company will also purchase new machineries for the mining production at the end of 2.13121]= winch will cost $1m with salvage yalue of $5. {straight-line depreciation for the life of the soda ash mine). The tax and fniancial year end are set at 31 December. The before-tax income from other operations is $151lm a year. The life of the soda ash mine is expected to be 1E1 years once it starts production. The company expects to charge a selling price of $41113 per ton of soda ash. This price is the same as the current price of imported soda ash. Due to increases in worldwide supply over the next few years, the company does not expect to see an increase in the international price of soda ash inthe foreseeable future. The marginal cost of production at the mine is estimated to be $4131 per ton. Transport costs to the Canadian market are expected to cost $31} per ton. The company is presently importing soda ash for the total Canadian market from a US supplier= and is able to earn a net before-tax income after all costs of $27 per ton of imported soda ash. The incremental marketing cost for the mine-d soda ash is $11] per ton and this is the same as the marketing cost per ton for imported soda ash. This cost still remain at $113 per ton in 213119 and 2021} but will increase by 4% per year thereafter over the operational life of the mine. Marketing costs are incurred once soda ash leaves the store in Dttatsn. The company has a contract to pm'chase 3013,111311] tons of soda ash per armum from its US supplier until the end of 20213, to meet demand. To allay the fears of customers regarding the future supply of soda ash? the company will keep stock levels of 1511:1301] tons of soda ash in Ottawa with value of $6111 once the mine reaches full production in 213121. This will be recovered at the end of the project. The company uses a cost of capital of 12%. The marginal tax rate is 30%. Determine whether the company should undertake the soda ash production by calculating the project's net present value and intemal rate of retuin. (25 marks)