3A private firm wishes to examine the profitability of constructing a phosphate fertilizer plant. The project will produce 10,000 tons of fertilizer per year starting in the first year, which will be sold in the domestic market for $350 per ton. It is expected to have a 20 year life.

Investment in plant and equipment will cost $7.5 million, spread evenly over 3 years and land will cost $1 million to be paid fully by the end of the first year. At the end of the project, the land will be sold for its purchase price. The plant will depreciate in value by 4% per year and can be sold for its depreciated value after 20 years.

The plant will need 100 workers and 20 office and managerial staff. The average wage for production workers is $800 per month, while that for management staff is $2000 per month. Raw materials will be $20 per ton of output produced while utilities will cost $5 per ton of output.

Labor, raw materials and utility costs will rise by 7% annually after the first year. The price of fertilizer is expected to rise by 3% after the first year of production. The firm has a private discount rate of 12%. Set up the parameters table and financial flow in sheet5 of an excel sheet and calculate net present value and benefit cost ratio. Your economic advisor predicts that with the unexpected effects of the recession domestic market price for fertilizer may actually be $275 per ton. Given all your results, should the private firm continue with the project? Show your sensitivity test and write your answer in sheet 6.