Question $3$: Marks $(13+12+10)$

A US Biotech firm plans to expand its operation in Singapore through the acquisition of a new laboratory machine which is expected to add value in the company in this COVID$-19$ era and beyond. This new machine costs $1\mathrm{.}5$ MILION SINS with an estimated cconomic life of $5$ years which has an additional installation cost of SIN $$100,000.$ At the end of project life, this machine will have an expected salvage value of $400,000$ Singapore dollar. The new machine will be fully depreciated on a straight line basis over the life of the project.

The firm is expected to have sales of SINS $600,000$ for the first years, and expected to increase sales by $30\%$ in the follow up years. The operating cost is expected to be $50\%$ total sales. Taxes would be paid pre$-$tax profit at a $30\%$ rate at host country. The average exchange rate over the life of the project is estimated to be $$\frac{0\mathrm{.}70}{S}IN.$ The project has a cost of capital $($funding cost$)$ of $11\%.$

a$.$ Calculates the estimated cash flow in USD.

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b$.$ Compute the NPV and Comment on the feasibility of the project. What do you expect the project's IRR be$,$ based on your calculated NPV$?$

c$.$ What will be impact on NPV if :

$($i$)$ Sales further increases$/$decreases by $20\%.$

$($ii$)$The exchange rate Singapore dollar appreciate against USD.

$($iii$)$ increase in geopolitical tension

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