Question 1 Biru Bookstores is considering a major expansion of its business. The details of the proposed expansion project are summarized below: - The company will have to purchase RM400,000 in equipment at y=0. - The project will have an economic life of four years. - The cost can be depreciated on a MACRS 3-year basis, 33\% in year 1, 45\% in year 2, 15% in year 3 an 7% in year 4. - At y=0, the project requires inventories increase by RM40,000 and accounts payable increase by RM10,000. The change in Net Operating Working Capital is expected to be fully recovered at y=4. - Salvage value at year 4 is expected to be RM0 - The company forecasts that the project will generate RM800,000 in sales the first 2 years (y=1 and 2) and RM500,000 in sales during the last two years (y=3 and 4). - Each year the project's operating costs excluding depreciation is expected to be 60% of sales revenue. - The company tax rate is 28%. - The project's cost of capital is 8%. Required: a) Calculate the project initial outlay b) What is the NPV of the proposed project? c) Should Biru Bookstores proceed with the project