Rare Agri$-$Products Ltd$.$is considering a new project with a projected life of seven $(7)$years$.$ The project falls under the government's subsidy program for encouraging local agricultural products and is eligible for a one$-$time rebate of $25\%$on any initial equipmentinstalled for the project. The initial equipment $($IE$)$will cost $$41,000,000.$At the end of year $1,$An additional equipment $($AE$)$costing $$3,500,000$will be needed at the end of year $3.$At the end of seven $(7)$years$,$ the original equipment, IE$,$will have no resale value but the supplementary equipment, AE$,$can be sold for $$50,000.$A working capital of $$1,350,000$will be needed.

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The project is forecast to generate sales of agri$-$products over the seven years as follows:

Year$-170,000$units

Year $2-100,000$units

Years $3-5-250,000$units

Years $6-7-325,000$units

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A sale price of $$150$per unit for the first two years is expected and then decline to $$90$per unit thereafter as the newness of the product loses some sheen. The variable expenses will amount to $30\%$of sales revenue. Fixed cash operating expenses will amount to $$1,100,000$per year. The company falls in the $25\%$tax category for ordinary income and $40\%$tax category for capital gain.

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The initial equipment is depreciated as per the $7-$year MACRS system and the additional equipment is depreciated on a straight$-$line basis. In the event of a negative taxable income, the tax is computed as usual and is reported as a negative number, indicating a reduction in loss after tax.

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The initial financing of the project will be carried out as follows:$-55\%$equity and $45\%$debt$.$ The company paid $$1\mathrm{.}50$per share in the form of dividend this year, which is likely to increase at a rate of $3\%$per year for the near future. The current price of the company's stock is $$9\mathrm{.}50$per share. The bank loan is likely to be arranged at an interest rate of $13\mathrm{.}5\%$p$.$a$.$

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You are required to:

$5.$Calculate the OCF for years $1$through $7$

$6.$Calculate the Terminal cash flow

$7.$Calculate the FCF for years $1$through $7$

$8.$Calculate the NPV and IRR