1. Kencana Wangi Corp. wants to make a new project that is making a brand-new product with a total equipment investment of $160.000.000 and because of the nature of the equipment, the firm uses the straight-line depreciation method. The economic life of the project is 8 (Eight) years. At the end of year five, the firm will stop the project and the equipment can be sold for $15,000,000. The consulting fee for this project amount to $2,000,000.

The sales unit of the new product are as follows: year 1, 250,000 units; year 2, 500,000 units; year 3; 600,000 units; year 4, 800,000 units; and year 5, 1,000,000 units. The sales price per unit are as follows: year 1 $500, year 2 until year 5, increase 28% each year. Meanwhile, its variable cost per unit is as follows: year 1 $400, year 2 until year 5, increase 30% each year.

The firm requires $8,000,000 in net working capital to start the project. The total fixed costs are $2,000,000 per year. Corporate tax is 20% and the shareholders of Kencana Wangi put 18% as their required rate of return for this project. (20 Points)

Required:

1. What is the projects initial outlay?
2. What are the projects annual free cash flows?
3. What is the terminal cash flow of the project?
4. Calculate the NPV, IRR, Payback Period and Profitability Index of this Project