(2 ) QUESTION 2 Curechem SA Limite market feasibility stu hem SA Limited is a large publicly traded firm on the Johannesbu ket feasibility study it is considering the manufacture and sale of a new search group at a cost of R 250,000. The finance department has Baths traded firm on the Johannesburg Stock Exchange. Based on a R100,000 the manufacture and sale of a new line of products developed by its R&D finance department has gathered the following information on the investment proposal: Initial investment (straight line depreciation) Scrap value (year 4; tax paid yr. 5) Selling price (current price) Expected selling price inflation Variable operating costs (current price) Fixed operating costs Expected operating cost inflation R 9 million R 600 000 R80/yr 4%/yr R35/unit R450 000 3%/yr Market research estimates that demand for the product will be as follows: Year 2 Demand (Units): 50,000 85,000 100, 000 75,000 The company has a real return hurdle rate of 12%. Expected inflation over the project's lifespan is 2.5%. CureChem come tax at 30% payable 1 year in arrears. The project would qualify for the tax offices "accelerated" capital cost allowance of 33.3% per year on a straight line basis. Required: 21 Calculate the flowing values for the investment proposal: i. Net present value ii. Internal rate of return (10) (5) 2.2 Briefly discuss your findings and advise whether the proposal is financially attractive. (4) 2.3 Assuming that the stock market is semi-strong efficient, what will be the implication for the firm's stock price if CureChem goes ahead with the project? PROGRAMME HANDBOOK: JANUARY 2019 INTAKE