Questions Case 1: Anwar Gas Traders: Capital Budgeting for expansion project

1. (10 points) Introduction into the case with a problem statement.
2. (10 points) What is the central issue facing Anwal Gas Traders?
3. (30 points) Perform the capital budgeting for the project and calculate the NPV, IRR, payback period and profitability index.
4. (20 points) The consultant advises that the government could increase the sectors tax from 29 percent to 35%. The resulting price increase would be only 3 percent annually. Which parts of the capital budgeting process change? How will this increase in tax and price increase affect the companys decision?
5. (20 points) The finance department advises a local bank interest rate of 19 percent* and a WACC of 15%. Perform capital budgeting techniques for the given scenario.

*You may assume that this is the effective cost of debt (rd) paid by the firm and used in the new WACC. Should you be critical to the WACC of 15% proposed by the finance department?

1. (10 points) Conclusion summarising the findings and answering the problem statement.