A friend of yours, Sam, has asked you to assist her in preparing materials to submit to a potential investor. The report you prepare will be part of Sams investment proposal or a recommendation to Sam that she not pursue the investment. Sam has a passion for cheesecake. She started making them a few years ago, and they are amazing. At first Sam made cheesecakes for friends, but she soon realized there was a market demand for well-made desserts. After perfecting her recipes, Sam began selling custom-order cheesecakes that she made at home and sold via word of mouth. The cheesecakes are now so popular that Sam does not have the equipment to keep up with demand. Therefore, she plans to buy a food truck that is equipped with all the equipment she needs to bake cheesecakes in higher volume, and she will be able to drive the truck to locations throughout Seattle to sell cheesecakes by the slice. If Sam is able to attract an investor, startup costs will be $200,000 in equipment that is depreciable on an 8-year straight-line schedule with zero salvage value. Sams plan is to start and operate the business for 6 years at the end of which time she expects the business to be worth at least $307,749. You expect Sam to have initial working capital needs of $15,000, but these needs will remain proportionate to sales (they will grow at the same rate as sales grow). You expect sales in the first year to be $250,000 and that sales will grow by 20% per year. You project annual fixed operating expenses of $95,000 in the first year. These fixed expenses will grow by 10% per year. Your annual variable operating expenses are as follows: cost of goods sold will be 40% of sales, marketing, general, and administrative expenses are expected to be 10% of sales, and all other operating expenses are expected to be 5% of sales. You expect Sam to pay taxes of 21%. Assume your required return is 16%. Should Sam pursue the project? Prepare a report responding to the following prompts: 1. Prepare pro forma statement that includes operating cash flows and free cash flows. Explain your pro forma statements in your report. You must use Excel (or another spreadsheet package) for your income statement and cash flow projections, and your calculations must make use of the formula and cell-reference functions within Excel. 2. Estimate the opportunitys NPV. Explain how you arrived at your NPV estimates in the report. Again, your calculations must be done within Excel using appropriate formulas and cell references. 3. Consider what happens to cash flows and NPV if Sales are 20% more than expected. Do the same for if sales are 20% less than expected? Discuss this analysis in your report. Your calculations must be such that you simply change one cell (to reflect the change in sales) and your spreadsheet recalculates everything. 4. What happens to your base NPV calculation if your required return is 18% rather than 16%? 5. What is your recommendation? Should Sam pursue this opportunity? Explain your recommendation and provide your ration