Valuation

Please, solve on excellent.

The big soft drink producing company that hired you is thinking about opening a new plant to produce a new kind of soft drink. Their expectations are that the project is no riskier than the existing soft drink business that they are presently involved in. The present running operations have been discounted at a 10% nominal rate and you have come to the conclusion that it is a good rate of discount for our new project as well. Company's expert engineers have calculated the construction costs of the plant to be 10 million dollars and that the construction will take 2 years, the costs will be evenly divided to both years (years 0 and 1). When finished, the plant will immediately start producing soft drinks. The sales experts have estimated that the sales of the soft drink would be at first one million bottles per year for three years, but after that, when the soft drink has become more popular, the sales will rise to 1,5 million bottles and will remain there. These calculations have been made with the best-estimate price of one bottle at 2 dollars. The production costs of the soft drink are 0,50 dollars per bottle. The plant can produce the soft drink for 12 years, and at the end of the last year, the machines can be sold as scrap at the fair price of its remaining value after it depreciated during years of operation. Depreciation of the initial investment is assumed in a straight line in 13 years, starting from the beginning of the operation of the plant. The government has a corporate tax rate at 20%. Estimated annual inflation is 4%. The working capital investments are estimated at 50 000 dollars each year from the beginning of the operation of the plant for five years. The last five years of the operation, when plenty of cash is available, the working capital investment is released back from the project profits (evenly distributed among the last five years). Calculate the following profitability indicators: Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), and Discounted Payback Period (DPP)