2. (20 points) Frost Feed & Farm Supply Store has been given the opportunity to purchase a feed mill. This would allow them to purchase grains and mix their own feeds rather than buying premixed feeds. The cost of the new feed mill is $95 per ton and they want to build a mill that can handle 3,000 tons. They expect after 15 years, there would be no salvage value and the feed mill would need to be replaced. The owners feel that a 12% return should be expected from the new project in order to undertake it. In addition, they would like a payback period of less than 8 years and a simple rate of return of at least 25%. Expected net returns before depreciation resulting from the investment and estimated depreciation expenses are show in the table below. Using the table below, answer questions a, b, c, and d (e is extra credit) and SHOW YOUR WORK! a. What is the payback period for this investment? b. What is the simple rate of return for this investment? C. What is the net present value of this investment, using a 12 percent return required by the owners? d. Do you believe this is a good investment project for Frost & Feed? Why or why not? e. Extra Credit (5 bonus points): Using an excel spreadsheet or a financial calculator, determine the internal rate of return for the investment. Estimated net profit and depreciation expense for new feed mill Net profit before Year depreciation* Depreciation $66,000 $19,000 66,000 19,000 66,000 19,000 66,000 19,000 66,000 19,000 57,420 19,000 57,420 19,000 57,420 19,000 57,420 19,000 54,780 19,000 54,780 19,000 54,780 19,000 54,780 19,000 54,780 19,000 54,780 19,000 *Net Profit here includes only cash inflows and outflows