Superior Refinery Ltd, a privately owned company in the United States, is planning to establish a subsidiary in Malaysia. The following information has been gathered to assess this project: The initial investment required is RM150 million or US$36,000,000 at the current spot rate of US$0.24/RM1 all in non-current assets, which will depreciate over 10 years using straight-line depreciation. The project will be terminated at the end of Year 3, when the subsidiary will be sold at RM80 million. This terminal value is not subject to withholding tax. Superior Refinery uses the following forecasts: Year Price (RM) Demand (units) Fixed operating costs (RM) Depreciation (RM) 1 275 1,000,000 28,000,000 22,000,000 2 325 700,000 30,000,000 22,000,000 3 285 900,000 29,500,000 22,000,000 Variable manufacturing costs are expected to be 50% of sales. No additional funds need be invested in the U.S. subsidiary during the period under consideration. Superior Refinery will remit 70% of its reported net cash flows back to the parent company as an annual cash dividend each period. The Malaysia corporate tax rate is 25%. The same spot rate is used by Superior Refinery for all the future periods. The exchange rate of the Ringgit Malaysia is expected to be US$0.24/RM1 for year 1, US$0.25/RM1 for year 2 and US$0.26/RM1 at the end of Year 3. The company requires a return of 15 percent from the project. Present value table of US $1: Required: Year 15% 1 2 3 0.870 0.756 0.658 (a) By using the table provided, calculate the net present value (NPV) of this project. (Hint: Round up all your workings and final figures to the nearest RM). (28 marks) (b) Should Superior Refinery accept this project? Justify your recommendation based on your calculations. (2 marks)