After extensive research and development, GoodGrib Tyres, Inc., has recently developed a new tyre, the SuperHold, and must decide whether to make the investment necessary to produce and market it. The tyre would be ideal for drivers doing a large amount of wet weather and offroad driving in addition to normal freeway usage. The research and development costs so far have totalled about RM10 million. The SyperHold would be put on the market beginning next year, and GoodGrib expects it to stay on the market for a total of four years. Test marketing costing RM5 million has shown that there is a significant market for a SuperHold-type tyre. As a financial analyst at GoodGrib Tyres, you have been asked by your CFO, Adam, to evaluate the SuperHold project and provide a recommendation on whether to go ahead with the investment. Except for the initial investment that will occur immediately, assume all cash flows will occur at year-end. GoodGrib must initially invest RM140 million in production equipment to make the SuperHold. This equipment can be sold for RM54 million at the end of four years. GoodGrib intends to sell the SuperHold to two distinct markets: 1. The original equipment manufacturer (OEM) market: The OEM market consists primarily of the large automobile companies (like Proton) that buy tyres for new cars. In the OEM market, the SuperHold is expected to sell for RM38 per tyre. The variable cost to produce each tyre is RM22. 2. The replacement market: The replacement market consists of all tyres purchased after the automobile has left the factory. This market allows higher margins; GoodGrib expects to sell the SuperHold for RM59 per tyre there. Variable costs are the same as in the OEM market. GoodGrib Tires intends to raise prices at 1 percent above the inflation rate; variable costs will also increase at 1 percent above the inflation rate. In addition, the SuperHold project will incur RM26 million in marketing and general administration costs the first year. This cost is expected GoodGrib's corporate tax is 40 percent. Annual inflation is expected to remain constant at 3.25 percent. The company uses a 15.9 percent discount rate to evaluate new product decisions. Automotive industry analysts expect automobile manufacturers to produce 5.6 million new cars this year and production to grow at 2.5 percent per year thereafter. Each new car needs four tyres (the spare tyres are undersized and are in a different category). GoodGrib Tyres expects the SuperHold to capture 11 percent of the OEM market. Industry analysts estimate that the replacement tyre market size will be 14 million tyres this year and that it will grow at 2 percent annually. GoodGrib expects the SuperHold to capture an 8 percent market share. The appropriate depreciation schedule for the equipment is the seven-year MACRS depreciation schedule. The immediate initial working capital requirement is RM9 million. Thereafter, the net working capital requirements will be 15 percent of sales. Required: 1. Based on information given above, calculate the Net Present Value (NPV), payback period, discounted payback period, Internal Rate of Return (IRR), and Profitability Index (PI) on this project. 2. Should GoodGrib proceed with SuperHold? Justify your answer. # pls show all the calculation and explanation long a bit ya tq After extensive research and development, GoodGrib Tyres, Inc., has recently developed a new tyre, the SuperHold, and must decide whether to make the investment necessary to produce and market it. The tyre would be ideal for drivers doing a large amount of wet weather and offroad driving in addition to normal freeway usage. The research and development costs so far have totalled about RM10 million. The SyperHold would be put on the market beginning next year, and GoodGrib expects it to stay on the market for a total of four years. Test marketing costing RM5 million has shown that there is a significant market for a SuperHold-type tyre. As a financial analyst at GoodGrib Tyres, you have been asked by your CFO, Adam, to evaluate the SuperHold project and provide a recommendation on whether to go ahead with the investment. Except for the initial investment that will occur immediately, assume all cash flows will occur at year-end. GoodGrib must initially invest RM140 million in production equipment to make the SuperHold. This equipment can be sold for RM54 million at the end of four years. GoodGrib intends to sell the SuperHold to two distinct markets: 1. The original equipment manufacturer (OEM) market: The OEM market consists primarily of the large automobile companies (like Proton) that buy tyres for new cars. In the OEM market, the SuperHold is expected to sell for RM38 per tyre. The variable cost to produce each tyre is RM22. 2. The replacement market: The replacement market consists of all tyres purchased after the automobile has left the factory. This market allows higher margins; GoodGrib expects to sell the SuperHold for RM59 per tyre there. Variable costs are the same as in the OEM market. GoodGrib Tires intends to raise prices at 1 percent above the inflation rate; variable costs will also increase at 1 percent above the inflation rate. In addition, the SuperHold project will incur RM26 million in marketing and general administration costs the first year. This cost is expected GoodGrib's corporate tax is 40 percent. Annual inflation is expected to remain constant at 3.25 percent. The company uses a 15.9 percent discount rate to evaluate new product decisions. Automotive industry analysts expect automobile manufacturers to produce 5.6 million new cars this year and production to grow at 2.5 percent per year thereafter. Each new car needs four tyres (the spare tyres are undersized and are in a different category). GoodGrib Tyres expects the SuperHold to capture 11 percent of the OEM market. Industry analysts estimate that the replacement tyre market size will be 14 million tyres this year and that it will grow at 2 percent annually. GoodGrib expects the SuperHold to capture an 8 percent market share. The appropriate depreciation schedule for the equipment is the seven-year MACRS depreciation schedule. The immediate initial working capital requirement is RM9 million. Thereafter, the net working capital requirements will be 15 percent of sales. Required: 1. Based on information given above, calculate the Net Present Value (NPV), payback period, discounted payback period, Internal Rate of Return (IRR), and Profitability Index (PI) on this project. 2. Should GoodGrib proceed with SuperHold? Justify your answer. # pls show all the calculation and explanation long a bit ya t