B-Pro Inc. commercializes energy bars. B-Pro is considering expanding its activities, which will require B-Pro to build a second commercial kitchen. The following information describes the project: The expansion project has a commercial life of 10 years, after which the projects assets will be liquidated and B-Pro will consolidate its activities. In the first year, revenues will be $60,000. Annual revenues will increase of 3% annually, over the entire duration of the project. Cost of goods sold, as a proportion of revenues, are 35% and will remain constant (in percentage) for the entire project. To realize this project, B-Pro will require one of its employees to work more. This employees current salary is $20,000 per year, and the employee currently works 15 hours per week. If the firm goes ahead with the project, this employee will work 15 hours in the new kitchen, in addition to the 15 hours he currently works in the existing kitchen. B-Pro will maintain the employees hourly salary, but will increase salaries by 1% per year, to compensate for the increase in costs of living. You can ignore the costs of holidays and social benefits. The other administrative expenses incurred by the project will be $2,000 per year, and will remain constant for the duration of the project. These expenses are incremental. B-Pro will build its commercial kitchen on a plot of land that B-Pro already owns. The land is currently not used, and the firm cannot sell it. Construction costs will be $80,000. The kitchen building is a depreciation deductible asset, and the GRAs depreciation rate is 4%. At the end of the project, B-Pro will sell both the land and the building for a total value of $160,000. If B-Pro decided not to go ahead with the project, it could sell the land (with no building on it) for $100,000 at the end of Year 10. The expansion will require that B-Pro invest in kitchen equipment. B-Pro will buy either one of two equipment: Equipment A costs $10,000, has annual operation costs of $2,000, and lasts 10 years. Equipment B costs $15,000, has annual operation costs of $1,500, and also lasts 10 years. The output quality does not depend on whether B-Pro buys Equipment A or B: B-Pro therefore chooses the equipment with the cheapest Equivalent Annual Cost. According to the Ghana Revenue Authority, the equipment (A or B) is a depreciation deductible asset, associated with a 20% depreciation rate. At the end of the project, the selected equipment will be sold at its Undepreciated Capital Cost (UCC). The equipment operating costs are not included in the administrative expenses or the costs of goods sold. The project will require a $5,000 investment in working capital, to be invested today. This investment will be completely recuperated at the conclusion of the project. The project will be financed partially by the issuance of an $80,000 debt. The interest rate on this debt is 6% per year, with compounding every six months. Interests are payable at the end of each year. The firms tax rate is 35%. The half-year rule applies to all depreciation calculations. Suppose that all cash flows occur at the end of each year. After a detailed analysis, B-Pros accountant concluded that the required rate of return on the firms projects, given their risk, is 10% annual effective. However, one of B-Pros board members believes (even though he did not perform an in-depth analysis of the project) that the required rate of return for this project should be 13%, the same rate of return as Ghanas T-Bills, because it is clear that this project cannot make us lose money. Compute the projects NPV, its internal rate of return, and its discounted payback. Should B-Pro go ahead with the project? Why (not).