The executive assistant (EA) to the CEO of ABC LTD. was given a task of analyzing the value of a renovation project for plant A. The forecasts, as provided below was presented to the EA by the plant manager. All values are in INR million. The corporate tax rate is 25%%

Project the free cash flow to the equity holders with the above data for all years from year 0 to 5 . if the cost of equity capital is 14% what is the value of renovation project for plant A ? Should they go ahead with the renovation? why or why not? There are no preferred equity holders.

Year 1 2. 3 4 5 1. Initial Investment (CAPEX) 700 2. Revenues 350 360 370 380 300 3. Variable costs 90 95 100 105 60 4. Depreciation 140 140 140 140 140 5. Fixed costs 14 14 14 6. Interest expense 20 20 20 18 18 7. Net proceeds to debt 140 8. Principal on debt which is repaid 30 110 9. Change in Operating Net Working capital 70 290 -360