A real estate construction company currently sends out its doors for painting to specialist firms. During the last financial year, the number of doors painted was 1,826 at a cost of $91,300. You are considering the possibility of this work being undertaken by the company in a workshop set up for this purpose. The following information relates to the project: 1- The paint shop can be set up in an existing warehouse that has not been used for some years and is estimated to be worth $300,000. 2- Equipment costing $160,000 needs to be purchased with a life expectancy of 6 years. The residual value is estimated as $80,000 at the end of year 6. 3- The annual costs in todays money of the operation are estimated to be: Rates and maintenance $7,920 Management $14,400 Labour $18,400 Head office costs $10,000* *the head office costs are paid in both scenarios (the doors are painted indoor or outdoor) 4- Based on the number of doors painted last year, the cost of consumable materials and other variable costs is estimated at $21,912. 5- Tax will be recoverable in year 2 and payable thereafter as shown below: Year 2 $15,220 Recoverable Year 3 $4,780 Payable Year 4 $6,180 Payable Year 5 $10,230 Payable Year 6 $13,268 Payable Year 7 $26,049 Payable The head office costs are a re-allocation of existing overheads. Required: Ignoring the opportunity cost of the premises, calculate the following performance indicators relating to the proposal: (30 marks) a- NPV based on a cost of capital of 11%. b- IRR. (Hint use 5%) c- Payback period in both nominal and present-value terms? Do these indicators suggest that the project should be undertaken? What other considerations should be taken into account by the company when establishing the new project? (10 marks)