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3. Antis Limited is a fairly large building materials manufacturer located in Accra. The company started as a cement retail shop and has grown over

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3. Antis Limited is a fairly large building materials manufacturer located in Accra. The company started as a cement retail shop and has grown over the years into a highly reputable building materials manufacturing company. Antis currently manufactures and retails items like building cement, iron rods, tiling cement and tiles. Out of all the items Antis produces, the highest revenue earning item is the building cement. Antis introduced the Antis Super Strong Cement on the market ten years and ago and this product had been initially met with high levels of market acceptance. However, the building materials market has been changing rapidly due to research on sustainability, demand for Antis Super Strong cement has been tapering over time and market research shows a consumer shift towards multi-purpose cement options. Antis is therefore considering introducing a new cement option that can serve multiple uses including tiling and terrazzo works. Antis spent GHS750 000 to develop a prototype for the new cement that would meet the needs of multiple segments of the market, but has spent a further GHS200 000 for a marketing study to determine the expected revenue that the new cement would rake in. The finance and accounting team has determined that each bag of the new cement would cost GHS86 each in variable costs while fixed costs have been estimated at GHS 3 million per year. The finance and accounting team working with the marketing team came up with the following sales volume estimates over the next five years 3 4 100,000 85,000 Year Units to be sold 1 70,000 2 80,000 5 75,000 The per unit price of the new cement will be GHS250. The manufacturing process requires the purchase of new equipment which has been estimated to cost GHS 15 million. Tax officials at the Ghana Revenue Authority have recommended that the machine be depreciated on a 60:30:10 schedule. The team estimates that the value of the equipment in five years will be GHS 3 million. As previously stated, Antis currently manufactures the Antis Super Strong Cement. Production of the Antis Super Strong Cement is expected to cease in two years. If Antis does not introduce the new cement, sales will be 80 000 units and 60 000 units for the next two years, respectively. The price of the Antis Super Strong cement is GHS240 per unit, with variable costs of GHS68 each and fixed costs of GHS1 800 000 per year. If Antis does introduce the new cement, sales of the existing cement brand will fall by 15 000 units per year, and the price of the existing units will have to be lowered to GHS220 each. The net working capital for the cement production process will be 20 per cent of sales. Antis has a 25% corporate tax rate and a 12 per cent required return. As a team of interns from Ashesi University working at Antis this summer, the CFO has asked that you prepare a report that addresses the following questions: 1. What is the NPV of the project? 2. Should Antis produce the new cement

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