QUESTION 1 (30 MARKS)

BAREBELLS Protein Bars, the best balance of taste, low sugar and fat content, minimal calories and high protein content. Antah Pusaka Berhad is considering a proposal to manufacture BAREBELLS Protein Bars in Malaysia. The project requires use of an existing storehouse, which Antah acquired four years ago for RM1,240,000. and which it currently rents out for RM171,120. Rental rates are not expected to change going forward. In addition to using the storehouse, the project requires an upfront investment into Portioning & Cutting Equipment (CS-RS ) of RM1,860,000. The CS-RS is using straight-line depreciation method for over the next 10 years. Antah expects to terminate the project at the end of eight years and to sell the machines and equipment for RM608,840. The project requires an initial investment into net working capital equal to 8% of predicted first-year sales. Subsequently, net working capital is 10% of the predicted sales over the following year. Sales of BAREBELLS Protein Bars are expected to be RM5,704,000 in the first year and to stay constant for eight years. Total manufacturing costs and operating expenses (excluding depreciation) are 75% of sales, and profits are taxed at 21%.

(a) Calculate the free cash flows of the BAREBELLS Protein Bars project. (20 marks) (b) Compute the NPV of the BAREBELLS Protein Bars project, if the cost of capital is 13%. (10 marks)

[TOTAL MARKS: 30 MARKS]