acca-p4难题求解答

Rosy PLC is a UK based, internationallydiversified company, operating in the food manufacturing industry. It iscurrently considering a new capital project in Australia, known as Project XY.
Newproject details
Project XY would require immediate capitalexpenditure of A$ 15m, plus A$ 5m of working capital which would be recoveredat the end of the project*s four year life. It is estimated that an annualrevenue of A$18m would be generated, with annual operating costs of A$ 5m.Straight-line depreciation over the life of the project is an allowable expenseagainst company tax in Australia which is charged at a rate of 50%, payable ateach year-end without delay. The project*s capital assets can be assumed tohave a zero scrap value.
Financingproposal
Rosy plans to finance Project XY with a ￡5mfour-year loan (net of issue costs) from the Euro-sterling market, plus ￡5m ofretained earnings. Issue costs on the Euro-sterling debt will be 2.5% and aretax deductible. The credit spread applicable to Rosy PLC on the Euro-sterlingloan is 40 basis points above the current UK risk free rate.
However, there has been some disagreementabout the proposed method of finance. The Chairman has suggested a rights issueof shares, while the sales director would like the Board to consider the use ofan Australian dollar loan.
Otherinformation
The food manufacturing industry has anequity beta of 1.40 and an average debt: equity gearing ratio of 1:4. Debtcapital can be assumed to be virtually risk-free. The current return on UKgovernment stock is 5.6% and the equity risk premium is 12%.
Corporate tax in the UK is at 35% and canbe assumed to be payable at each year-end without delay. Because of adouble-taxation agreement, Rosy will not have to pay any UK tax on Project XY.The company is expected to have a substantial UK tax liability from otheroperations for the foreseeable future.
The current spot rate is A$ 2.0000 to ￡1and the A$ is expected to depreciate against the ￡ at an annual rate of 10%.

Required:
(a) Estimate the adjusted present value(APV) of Project XY. Recommend whether the project should be undertaken.

(b) Explain the difference between APV and NPV as methods of investment appraisal. Comment upon the circumstances under which APV might be a better method of evaluating a capital investment than NPV.