Question 1 APV Jopster Ltd is considering investing in a project that has a capital outlay on plant and equipment of $72 million and lasts three years. Jopster Ltd uses straight-line depreciation to zero for tax purposes, and at the end of that time, the plant and equipment could be sold for $2,700,000 before tax. Net working capital of $600,000 will be required at the start of year 1 of operations; and this will be retrieved at the end of the project. Sixty percent of the funding will be provided by a three-year 5 percent coupon bond issued at par. Jopster Ltd's unlevered cost of equity is 9 percent and its tax rate is 40 percent. The risk- free rate is 2 percent and the firm's unlevered beta is 1. The firm's expected cash flows before interest, depreciation and tax are: Year 1 2 3 $ 48,000,000 60,000,000 52,000,000 Required: Calculate the APV of Jopster Ltd's project and briefly explain why the project should be undertaken or why it should not. TOTAL: 16 MARKS