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Questioncommercialisation of its intellectual property which allows for… commercialisation of its intellectual property which allows for specialised surfaces which can be usedin life sciences, diagnostic and energy markets. It has three products it is developing being AnteoCoat,AnteoBind and AnteoRelease which are used in the energy, diagnostic and medical device marketsrespectively.AnteoTech Limited (ADO.AX) is considering embarking on a new project to introduce a new productSARS-CoV-2 Antigen Rapid Diagnostic Test (Antigen RDT). The project is expected to last ten years.Over the last 2 years (2019 and 2020), ADO has already spent 0.2 million on R&D to optimise thedesign of the new product Antigen RDT. If the company would decide to go ahead with the project, thenecessary equipment requires an investment equal to 250% of the company’s Property, Plant, andEquipment (PPE), as per the fiscal year ended 30 Jun 2020. Additional shipping and installation cost topurchase the equipment is $0.1 million. This equipment will be depreciated over 10 years using theprime cost method. It is believed that the equipment can be sold at the end of the project with aliquidation value of about 10% of the initial investment.First-year revenue for the new product is expected to be 50% of total Revenue and other income forADO’s fiscal year ended 30 June 2020. The new product’s revenue is expected to grow at 25% for thesecond year, then 20% for the third, 15% for the fourth year, 10% for the fifth year and after that declineby 5% annually for the final 5 years of the expected life of the product.If the ADO can manufacture the new product, the variable costs for the new product account for 45%of the sale price. Annual fixed costs excluding depreciation will be $0.25 million. Net working capital(NWC) will be 15 percent of the annual sale of the project, and will be contributed at the beginning ofeach year. All NWC will be liquidated at the termination of the project. ADO has a 30 percent corporatetax rate. The ASX200 expected return is 8 percent per annum, the relevant risk-free return is 1 percentper annum.Your team will have to determine the rest of the cash flows associated with this project. Here are sometips to guide your analyses:1) Obtain AnteoTech Limited’s (ticker code: ADO.AX) financial statements. Download the annualincome statements, balance sheet and cash flow statements for the last four fiscal years. Make sure toget the annual financial statements, instead of the quarterly.2) You are now ready to determine the free cash flow. Compute the free cash flow for each year. Setup the timeline and computation of the free cash flow in separate columns for each year of the projectlife. Be sure to make outflows negative and inflows positive.3) Assume that the project’s cost of capital will be equal to the cost of equity of the company. Thecompany is not using debt.4) Provide a clear overview table which shows the calculation of all cash flows, and determine the NPVand the IRR of the project.BusinessFinanceBAFN 200

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