Ahlul Hair Company is considering purchasing new equipment to develop hair restoration product. The product will require some work outdoors and will contaminate as small area of the property.

Investment in equipment required	$300,000
Working capital required	$80,000
Annual cash receipts before taxes	$200,000
Annual cash expenses before taxes	$100,000
Cost of restoring the land at the end of the project	$30,000

The product is likely to remain on the market for only five years. The equipment would be fully depreciated at the end of five years. The equipment will have no value at the end of this time and will be scrapped. Ahlul uses straight-line depreciation for tax purposes. The tax rate is 30% and Ahlul uses a 8% discount rate in investment proposals. The working capital would be released for other uses at the end of the five years.

Answer the following questions using Microsoft Excel and submit.

1. Compute the net present value of the equipment and the Internal Rate of Return.

2. From a purely financial perspective, is it profitable to invest in this product?

3. Write a brief memo addressing the quantitative and qualitative items related to the investment. Be sure to include all of the stakeholders in the analysis.

4. Assume the Federal Reserve becomes alarmed about inflation and uses monetary policy to raises the discount rate to 12%. Recompute the net present value.

5. From a purely financial perspective, is it profitable to invest in this product if the discount rate is 12%?