Question
CABA Company launches a 10-year project. If the shareholders have an indifferent investment rate of return at 7.6% in the financial market. Assume the Free
CABA Company launches a 10-year project. If the shareholders have an indifferent investment rate of return at 7.6% in the financial market. Assume the Free Cash Flow (FCF) of the project maintains a constant growth rate at 4% since Year 4 and there is no salvage value at the end of the project.
- Please calculate FCF for each year
(2)What is the NPV of the project
Unit: $million
| Items | Present | Year 1 | Year 2 | Year 3 | Year 4 |
| Initial investments | 2100 |
|
|
|
|
| Revenue |
| 1900 | 2300 | 2500 | 3500 |
| Costs of goods sold |
| 700 | 1000 | 1100 | 1321 |
| Other costs |
| 200 | 260 | 310 | 529 |
| Depreciation |
| 1000 | 500 | 350 | 150 |
| EBIT |
| 0 | 540 | 740 | 500 |
| Tax rate |
| 20% | 20% | 20% | 20% |
| Capital expenditure |
| 6 | 30 | 90 | 150 |
| Changes in Net Working Capital |
| (120) | 100 | 110 | (50) |
| Free Cash Flow |
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