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. Demand for company's products is growing given the growing pressures on medical facilities. Blaine...

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Accounting

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. Demand for company's products is growing given the growing pressures on medical facilities. Blaine is considering investing in new plant to enable it to boost output and sales. The new plant will cost 60m. The following data apply to the Blaine finances: Debt to (Debt+Equity) ratio: 75% Equity beta: 1.9 Credit risk premium: 2.75% Share price: 11.50 The risk-free rate of interest is 0.5% per annum. The equity market rate of return is 2.8%. The corporate tax rate levied on profits is 17% The forecast for operating costs and sales revenue arising from the additional sales facilitated by the new plant, from the start of Year 2, are as follows: Year 2 3 4 5 6 7 20 30 40 50 55 55 Operating costs (m equivalent) 64 Operating (sales) 18 36 50 78 78 revenues (m equivalent) a. Calculate WACC b. Comment on the features of Blaine capital structure and the risks this associated with this structure. (4 marks) c. Calculate the Net Present Value (NPV) of the proposed investment. Based on your findings would you recommend that the investment should proceed? d. Calculate the Internal Rate of Return for the proposed investment

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