OPEN Company Limited is considering establishing a manufacturing plant in Dodoma for product ABC. The firm had already invested Tshs$.50$ million in Research and development to have the ABC prototype products made and certified. Carrying out the project will involve spending Tshs$.800$ million to pay for the acquisition of the required plant and machinery. The plant and machinery will be acquired from Dar es Salaam and will have to be shipped to Dodoma at a cost of Tshs $60$ million while installation and commissioning cost is estimated at Tshs$.150$ million. The company will take advantage of its own warehouse suitably located in an industrial area in Dodoma to house the plant. However, this warehouse is currently rented out to another company for merchandise storage at an annual rental of Tsh$.100$ million. The company will also incur a net working capital investment of Tshs$.200$ million, initially.

The plant will have a useful life of five $(5)$ years, at the end of which the plant and equipment will be sold off and it is estimated to fetch Tshs$.350$ million. If the project is successfully launched, it will contribute an additional annual cash flow of Tshs$.1,500$ million. The company will also spend annually Tshs$.700$ million in operating costs other than depreciation, interest and tax. Furthermore, the project will need an injection of Tshs$.120$ million annually for two years as additional working capital i$.$e$.,$ at the end of year $2$ and year $3$ respectively.

The effective tax rate is $25$ percent payable in the same year revenue is earned and the rate is not expected to change over the project's life. Plant and machinery will be depreciated at a rate of $30$ percent using reducing balance methods.

$($a$)$ Using the Net Present Value appraisal method, evaluate the plausibility of the project. Investors in a similar project demand a return on investment of $25$ percent

$($b$)$ At what rate would you change your position on the project and why?

Present assumption and discssion on MS EXCEL showing cash flow anaylsis