Calculate the grand cash flow and npv and interpret finding

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A firm is evaluating a project that costs RM450m, has a five-year life and has a salvage value of RM3m. Assume that depreciation is straight line with zero residual value over the life of the project. Working capital of RM35m is needed initially and the same will be released in the final year. Sales are projected at 555,000 units per year with a selling price of RM505 per unit, variable cost RM315 per unit, and fixed costs are RM1,325,000 per year. The tax rate is 25% and the required rate of return is 12.5% on this project.

Problem 1. Calculate the grand cash flow and NPV. Interpret your findings

Problem 2. Re-compute NPV if the sales increase by 225000 units on an average. Discuss

Reference no: EM132713866

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