CSL is a company that is listed on the Australian Securities Exchange (ASX). As of 28 March 2024, CSL had a market capitalization of $139.138 billion, showcasing its significant presence in the global biotech industry Project Announcement: On 28 March 2024, CSL announced its intention to build a state-of-the-art biotech facility (New Biotech Project) to increase its production of plasma-derived therapies (this is a fictional scenario for this assignment only). Given the growing demand for these therapies, CSL seeks to evaluate the New Biotech Project's construction feasibility to ensure they meet future needs. In late 2023, CSL conducted a detailed feasibility study for its New Biotech Project. The study costs $1 million to assess market demand and financial viability. The New Biotech Project has a seven-year useful life. In 2024, CSL New Biotech Project's initial investment is $210 million for building construction, $490 million for purchasing essential machines (production assets) and installation costs. The Australian Taxation Office (ATO) has confirmed to CSL that for tax purposes, the New Biotech Project's building has a thirty-year life, and the machines have a seven-year tax life. CSL expects that machines can be operated for seven years before requiring replacement. In 2024, CSL plans to take a $400 million loan over 7 years with an interest rate of 6% per annum, and the first annual instalment is in 2025. The rest of the investment is financed from internal funds. CSL owns land that can be used for the New Biotech Project. The land is currently leased to a construction company for $500,000 per annum. If the New Biotech Project is not built, CSL will continue the lease agreement. Starting operations in 2025, initial revenues are expected at $300 million, with a projected annual growth of 4%. Variable costs are projected at 20% of sales, and fixed operating costs of $80 million annually. Maintenance expenses are $1 million in 2025, with a projected annual growth of 5%. Marketing expenses are $500,000 in 2025, with a projected annual growth of 1%. Training costs are $200,000 in 2025, with a projected annual growth of 3%. The salary of CSL's Chief Executive Officer (CEO) is $700,000 in 2024 and is not expected to change whether the New Biotech Project is approved by the CSL's Board of Directors or not. CSL assumes that the New Biotech Project buildings can be sold for $50 million in 2031. The resale value of the machines is $10 million in 2031. If the Board approves the New Biotech Project, CSL anticipates that it will require inventory to increase to a level of $10 million today (2024) compared with the existing amount of $7 million (2023). In addition, accounts payable is expected to increase by $4 million to $10 million. Further, the Accounts Receivable balance will increase from the current level of $8 million in 2023 to $11 million in 2024. Assume a tax rate of 30% and a required rate of return of 12%. What are the cash flows and Net Present Value for this investment?

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.