b) The NPV and internal rate of return for the proposed labour intensive project (include calculations).

Labour Intensive Option If EH Logistics sticks to labour to handle packages then: It can pack 600,000 units in year 1 and this number will likely to go up by 120% in year 2, 10% in year 3 and 3.31% in year 4 compared to the previous years. It is expected to remain constant after that. The packages are priced at $2 per package. The company has invested $900,000 in buildings in the current year. The buildings will be used for handling the packages. The buildings are fully furnished and have good facilities for people to work comfortably. EH Logistics estimated that the fixed cost for this arrangement is going to be $260,000 in the first year, which includes set-up cost of $50,000. Thereafter, the fixed cost would be $210,000. The variable cost per package is $1.40. The buildings are fully depreciated in 15 years (at an annual rate of $60,000) for tax purposes. However, the salvage value of the buildings is $285,000. There will be a further increase in net working capital of $140,000, $14,000, $15000, $17000 and $20,000 for year 1, 2, 3, 4 and year 5 to year 15. The tax rate is 30%. The opportunity cost of capital for this project is 10%. There is no recovery of working capital