Antel Corp. is a large manufacturer of a broad range of computerchips with a market value of capital (Equity + Net Debt) of 200 billiondollars. It is considering the introduction of a new line of chipsfor handheld devices in 2013. Antel's revenues from the new line areprojected to be 3 billion dollars per year between 2013 and 2015 (3years), after which the chip will become obsolete. The RD expensesper year during the four years of development (2008 to 2011) were0.5 billion dollars and the only capital expenditures required to setup the production line are 1 billion dollars, to be paid at the end of2012.

Capital Expenditures in the new line can be depreciated usingthe 5 year straight-line method and the salvage value of the fixed assetsis expected to be sero after they are fully depreciated. Both, thecurrent working assets (the sum of necessary cash, accounts receivable,inventory, etc.) and the automatic sources (the sum of accountspayableand accrued expenses), required to operate and distribute thenew line are expected to be 0.85 billion dollars and to increase at a17.5 % per year.

The line should yield operating profit margins of 20% (Note: operating profit margin = 100 × EBIT/Sales).

1. Suppose that Antel uses a weighted average cost of capital of10 % as a benchmark for its new chip projects. Calculate the NPVof the new project line (the corporate tax rate is 40 %).