Question 4: (Total 12 marks) OPPO Co. is offered an opportunity to invest $2 million now and to receive after-tax cash flows of $1 million at the end of year 1 and $1.4 million in year 2. This project is expected to last for two years only. Th cost of capital is 12% if it is all-equity financed. OPPO intends to borrow $500,000 with an interest rate ( 8%. The debt must be repaid in two equal annual instalments. The payments will occur at the end of eac year. Assume OPPO has a marginal corporate tax rate of 30%. Required: (a) Calculate the base-case NPV of this project. (b) Calculate the adjusted present value (APV) of this project. (3 marks) (9 marks) Question 5: (9 marks) You are the chief operating officer at Breakkie Co. which produces breakfast cereal and needs 150,000 bushels of corn in March 2017. Suppose today is November 10 2016 and corn future contract for March 2017 delivery has a price of $4.05 per bushel. You are concerned that corn price might go up between now and March 2017 Required: (a) How can you use corn future contract to hedge your firm's risk exposure? What is the total cost you will be effectively locking in? (4 marks) (b) Suppose the market price of corn is $4.25 per bushel in March 2017, what is your firm's profit or loss on (5 marks) the future position