1. Calculate the cost of capital:

a) cost of equity

b) cost of debt

c) weighted average cost of capital

d) Net present value

e) Incremental cash flows year 1 to year 10 if applicable

Industrial Air Filtration System (AFS) Projections The Ventilation Division will manufacture the IAFS using idle facilities. This plant can produce up to 200 units per year over the product's 10-year life. An outside appraiser indicated that the plant is worth CAD 2,750,000, which breaks down as CAD 1,250,000 for the land and CAD 1,500,000 for the building. New production equipment costing CAD 5,300,000 is also required. It is believed that the land will have a residual value of CAD 1,500,000 at the end of the project's life, while the building and equipment will be worth CAD 350,000 and CAD 250,000. The building is subject to a CCA rate of 4.0% and the equipment is subject to a CCA rate of 20.0%. Incremental net working capital of CAD 550,000 is also needed which will be liquidated at the end of the product's life. APSI sales are estimated to be 75 units in the first year and will grow by 25.0% a year until plant capacity is reached. The unit price is CAD 125,000 and unit costs are CAD 103,500 per unit, which includes direct materials, direct labour, and manufacturing overhead. The Ventilation Division must also pay a CAD 10,000 licensing fee per unit for the vacuum cleaner technology. Incremental selling and administration costs will be CAD 360,000 per year. Industrial Air Filtration System (AFS) Projections The Ventilation Division will manufacture the IAFS using idle facilities. This plant can produce up to 200 units per year over the product's 10-year life. An outside appraiser indicated that the plant is worth CAD 2,750,000, which breaks down as CAD 1,250,000 for the land and CAD 1,500,000 for the building. New production equipment costing CAD 5,300,000 is also required. It is believed that the land will have a residual value of CAD 1,500,000 at the end of the project's life, while the building and equipment will be worth CAD 350,000 and CAD 250,000. The building is subject to a CCA rate of 4.0% and the equipment is subject to a CCA rate of 20.0%. Incremental net working capital of CAD 550,000 is also needed which will be liquidated at the end of the product's life. APSI sales are estimated to be 75 units in the first year and will grow by 25.0% a year until plant capacity is reached. The unit price is CAD 125,000 and unit costs are CAD 103,500 per unit, which includes direct materials, direct labour, and manufacturing overhead. The Ventilation Division must also pay a CAD 10,000 licensing fee per unit for the vacuum cleaner technology. Incremental selling and administration costs will be CAD 360,000 per year