QUESTION 4: Alset Limited is considering replacing the old widget maker with the new one at its plant in Windsor. The old widget maker has a current market value of $20,000,000 and zero salvage value after 10 years. The new widget maker will generate incremental pre tax cash flow of $15,000,000 per year for 10 years and will have zero salvage value after 10 years of use. The widget maker will be depreciated at a CCA rate of 30%. Alset Limited is in 40% tax bracket and ro = 9%. Treasury bills are yielding 2% rate of return. a. What is the maximum price Alset should be willing to pay for the widget maker? b. Suppose the price of the new widget maker is $100,000,000. Alset will issue $80,000,000 worth of debt to finance the purchase. Under the loan agreement Alset will pay 5% interest annually on the outstanding balance. Alset will also make year end principal payments of $20,000,000 per year, completely retiring the issue at the end of 4th year. Ignore cost of financial distress and floatation cost. Determine APV. c. To encourage Alset to replace old widget maker, Ontario Government is willing to lend $80,000,000 at an interest rate of 2% per year for 3 years. Principal to be repaid at the end of 3rd year. Now what is the maximum price Alset would be willing to pay for the widget maker