URGENT PLSSSSS

Question 2 Hexagon Corporation is evaluating a proposal to build a manufacturing facility in Indonesia. The company expected sales from this project are as follows:

YEAR	1	2	3	4
SALES	Rp2,650 million	Rp4,000 million	Rp3,400 million	Rp1,950 million

Each year, operating costs excluding depreciation are expected to be 60% of sales. This project will require an initial investment of Rp2,850 million (Indonesia Rupiah) for the manufacturing facility and Rp300 million for working capital. The company expect 100% recovery rate for working capital and the factory's disposal value is expected to be R450 million at the end of the breioctlife which is 4 years.

The investment will be funded internal with roughly the same debt/equity ratio. 40% debt (D/V) and 60% equity (E/V). The current cost of debt is 8%. The beta factor for investment in Indonesia is 2 8. The risk-free rate is 4% and the market return is 9%.

The nominal risk-free interest rate in Malaysia is 6% and the nominal risk-free interest rate in Indonesia is 7%. The current spot exchange rate is RM0.0347/Rp100

Required:

Calculate the Net Present Value (NPV) of this project and should Hexagon Corporation make this investment? (20 Marks)

Subject:international finance