(33.3 points) Over the last five years the Billagong Company has spent $25 million developing a new product called bings. It is considering whether to build a plant in California that will manufacture bings. The current date is 12/31/X0. The cost of the plant is $10 million to be paid now. It will take one year to build. The plant will start producing on 1/1/X2 and the first revenues and costs will be received and paid on 12/31/X2. The plant is expected to produce for three years. It will produce 3 million bings a year. The plant can be depreciated over the three years it is in production. The plant has zero salvage value. The company can sell each bing for S5 and the raw materials will cost $2 per bing in all three years bings are produced. The total labor costs for the first year of production will be $1.5 million (i.e. on 12/31/X2) and these are expected to grow at a rate of 4 percent per year. The land the plant will be built on could be rented out for $500,000 a year with the rent being paid each year at the beginning of the year. The firm already owns some of the machines that it will use for producing the bings. These cost S1 million ten years ago. The S10 million cost of the plant mentioned initially does not include the cost of these machines. These machines are currently fully depreciated and have no market value at all. All figures are in nominal terms and are stated in before tax terms unless otherwise indicated. The firm uses straight-line depreciation and has a tax rate of 35 percent. It has profitable ongoing operations and an opportunity cost of capital for this type of project of 10 percent. What is the NPV of the plant? 1