Question 50 Hill plc manufactures and sells car racing games for children through retailers and on-line retailers. It nas operated successfully in the CIK for several years and has been given the opponunity to produce and sell its products in China. This will involve building a production plant in the Shenzhen region of China_v The initial investment is expected to cost $75 million on January 1st, 2019 The plant will be fully built and operational on this date A licence also must be purchased on this date and will cost $4 milliorm Cash flows are expected to be positive, and a net inflow of approximately $25 per year is expected for the next tour years_v The licence will only last for tour years and the government has made Hill plc aware that the plant will be taken over by the Chinese government on 31/12/2022 at nil coste Hill plc's cost of capital is 8%. Its depreciation policy is to calculate it on a straight- line basis with nil residual value. Hill plc's current overall return on investment (ROI) is For 'Mormation:v ROI is calculated using controllable profit for the return value. Controllable profit is calculated as net cash flows less depreciation provisione ROI and Residual Income (RI) are calculated using the opening written down value ot plant and licence assets in each year_v The Net Present Value (NPV) tor the investment is positive at $3.8m Required:e a) Prepare a summary schedule tor the proposed investment tor each of the tour years ending 31st December 2019 to 31st December 2022 which snows the estimated value ot-.e i. Controllable Profit per annume ii_ Residual income tor years 1 213 and 40 iii_ Return on Investment tor years 1 and 40 (10 marks)v b) Discuss the implications ot your results in part a) above in terms ot management decision making witn regard to this project Include the NPV tigure In this discussion (10 marks)v Total 20 marksv