Choose a company from Yahoo Finance. Assume that this company is considering a new plant project. The cost of the project is $10 million. Shipping and installation costs are $1 million and $2 million, respectively. The economic life of the project is 10 years and the salvage value is assumed to be $500,000. The plant is expected to produce and sell 1 million units of output each year at a unit price of $15 with 3% annual increase. Unit cost is $12 and it increases by 2% each year. The plants working capital requirement for each year is 10% of next years sales. The companys 8% coupon bonds are selling at par. The risk-free rate is 5%, market risk premium is 6% and the beta of the company is 1.6. Assume 10-year straight line depreciation.

a. Calculate the NPV, IRR and MIRR of the project, comment on the results and decide whether to accept or reject it.

b. Considering that there is a risk of rapidly increasing input costs in the future, calculate the NPV in case input costs increase 5% each year, rather than 2%. Comment on the results.