User

Initial layout $(45,000,000\mathrm{.}00)$

additional funding in net working capital $(6,000,000\mathrm{.}00)$

additional capital expenditure $(10,000,000\mathrm{.}00)$

life of project $8$ years

salvage value $10,000,000\mathrm{.}00$

depreciation $20$ DV per year

payback period $7$ years

tax rate $28\%$ The company estimates that the investment will generate revenue of $$10$ million and $$14$ million in the first $2$ years. This is followed by revenue of $$22$ million in Year $3,$ and the revenue will increase by $5\%$ per year thereafter until Year $8.$

$$ The variable costs are estimated at $40\%$ for the first two years and will increase to

$45\%$ in the thereafter till Year $8.$

$$ The project will incur $$1\mathrm{.}5$ million per annum in fixed costs $($fixed costs include

coupon payments to bondholders$)$

market data: last dividend pd $0\mathrm{.}81$ growth rate $4\mathrm{.}11\%$

$*$ Coupon Bonds: $$20,000,000,4\mathrm{.}75\%$ coupon bonds outstanding with $25$ years to maturity redeemable at a par value of $$1000.$ The coupon bond isselling at $95\%$ of par; The bond makes semi$-$annual payments$*$ Zero$-$CouponBonds: $$10,000,000$; $15$ years to maturity and redeemable at a par value of $$1000.$ The zero$-$coupon bonds are selling at $24\mathrm{.}5\%$ of par.

$*$Equity: $1,000,000$ ordinary shares, selling for $$30$ per share

$*$Non$-$redeemable preference shares:

$1,000,000$ shares $($par value $$20$ per share$)$ with $4\mathrm{.}25\%$ dividends

$($after taxes$),$ selling for $$15$ per share. Compute the Weighted Average Cost of Capital $($WACC$)$ of EquipMed. Show all you workings.

Also compute

a$.$ Net Present Value $($NPV$)$

b$.$ Internal Rate of Return $($IRR$)$

c$.$ Profitability Index $($PI$)$

d$.$ Payback Period

e$.$ Discounted Payback Period