: : Assignment.pdf Business Finance Course - Assignment (Total marks 100) Assume that you have been appointed as the finance director of XYZ Company. The company is considering investing in the production of an electronic security device, with an expected market life of five years. The following table shows the P&L statement for the first year. Year 0 ($'000) 3,000 Year 1 ($'000) Year 2 ($'000) Year 3 (5'000) Year 4 (5'000) Year 5 ($'000) Initial investment Sales Materials Labour Overhead Interest Depreciation Taxable profit Taxation Profit after tax 3,500 535 1,070 50 576 500 769 269 500 You have been given the following information: Sales of electronic security devices are expected to increase by 15% per year. . . Material costs are expected to increase by 10% per year, while labour costs are expected to increase by 5% per year. The overhead cost will remain fixed at $50,000 per year The company will paid 5 equal interest payments per year, $576,000 each . The company use a straight line depreciation method ($500,000 per year) . Taxation on profits is at a rate of 35%. The company's using mix sources of financing, the weighted average cost of capital is estimated to be 10%. Required: a. Calculate the net present value of the proposed project. Advice your company whether this investment opportunity should be accepted or not. (40 marks) b. Calculate the payback period of such investment. (15 marks) c. What will be the impact if the company use equity source of financing only? Explain your answer by stating the effects on the investment decision of such proposed project. (30 marks) d. Discuss the role of capital budgeting in the strategic financial planning. (15 marks)