1. For Project C, Calculate the expected net present value (NPV), internal rate of return (IRR), Profitability index (PI), return on capital employed (ROCE), Payback Period (PP) and discounted payback period (DPP)

Wave Co is considering investing $3.8 million in some projects. The finance manager has identified three possible options from three different product lines of the company for investment and you as a consultant have been assigned the job of appraising these projects for investment. The following information is available about the capital structure of the company: Authorized share capital, $0.50 each 103 million shares Issued share capital, $0.50 each 83 million shares 10% Bonds issued, $100 each 2.5 million bonds The current market price of a share is at $6 per share after the dividend has been just paid and next year's dividend per share is expected to be 10 cents. The average annual dividend growth rate is at 16 percent. The bonds which are compounded annually are currently being traded in the market for a price of $102 per bond and redeemable in 3 years at par. The projects identified are not divisible and may not be postponed until a future period. The annual tax rate is 30%, and it is paid one year in arrears. The details of the projects identified are as follows: Project C This project has been proposed by the Fixtures Division of the company which is planning to expand the production level of an existing product due to increase in demand. The current annual demand and production capacity is 10,500 units. The demand forecasts of this product for the next four years are as follows: Year 7 2 3 3 4 Demand (units) 12,300 14,300 16,600 18,800 A new machine is available now for a cost of $1,280,000, which has an annual production capacity of 7,500 units. This machine has an expected life of four years and nil scrap value. Also, investment in working capital of $43,000 is required now and it is expected to recover fully at the end of the fourth year. The current selling price is $597 per unit and it is expected to increase by $9 every year. The variable cost is currently $497 per unit and it is also expected to increase by $8 annually. The current fixed overhead of $640,000 will increase by $10,000 for each additional 1,000 units produced over the current annual production level. If the company buys the new machine a tax allowable depreciation on the investment on 25% reducing balance basis can be claimed. The company uses its after-tax weighted average cost of capital when appraising this project