. Blaine's revenues from the sales of its products are currently distributed as follows: The UK: 20% The European Union (EU): 50% Asia: 20% North America: 10% Demand for company's products is growing given the growing pressures on medical facilities. Blaine is considering investing in new plant to enable it to boost output and sales. The new plant will cost 60m. An additional 15m of working capital will also be needed at the start of the project although it is envisaged that this will be released at the end of Year 7. Capital allowances on new investments in plant, at the corporate tax rate of 17%, applies on a straight-line basis over five years, with the relief being paid annually, starting at the end of Year 1 of the project The following data apply to the Blaine finances Debt to (Debt+Equity) ratio: 75% Equity beta: 1.9 Credit risk premium: 2.75% Share price: 11.50 The risk-free rate of interest is 0.5% per annum. The equity market rate of return is 2.8%. The corporate tax rate levied on profits is 17% The forecast for operating costs and sales revenue arising from the additional sales facilitated by the new plant, from the start of Year 2, are as follows: Year 2 3 4 5 6 7 20 30 40 50 55 55 Operating costs (fm equivalent) Operating sales) revenues (fm equivalent) 18 36 50 64 78 78 a. Calculate the Net Present Value (NPV) of the proposed investment. Based on your findings would you recommend that the investment should proceed?|