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Question 1 The industrial chemicals division of ChemCo is considering launching a new product onto the market. The equipment and associated production engineering costs to produce this product is estimated at 2.0 million. It is ChemCo's policy to prudently review such investments on a 5-year time scale with an assumption of zero residual value You are provided with the following information on forecasted sales, costs and revenues Year> 4 Sales volume (barrels) Price/ barrel Variable cost per barrel e 10,000 12,000 15,000 20,000 20,000 110 45 100 125 130 40 42 50 This Project will incur an additional fixed cost of 260,000 in year 1, rising by 10,000 each year (i.e. reaching 300,000 in year 5) ChemCo's criteria for such investment projects are (i) (ii) (iii) Simple payback: 40% Return on Capital (using DCF): > 20% A. Showing appropriate calculations, comment on this investment relative to criteria () and (ii) above [40 Marks] 40 Marks] C. You are told that the NPV of this investment for a 25% return on capital 20 Marks] B. Likewise, comment on this investment relative to criteriai) above is minus 98,600. What is the approximate Internal Rate of Return on this project? Year 0.833 Year 2 0.694 Year 3Year 4 0.579 Year 5 0.402 20% Discount Factors | 0.482