British Columbia Research Associates Incorporated (BCRA), a dynamic and thriving research company, has an opportunity to land a lucrative federal government contract in which they would analyze census data. The project would last four years. BCRA has already spent $150,000 lobbying the appropriate people in the Department of Vital Statistics as well as the Minister in charge of the Department in order to try to land this contract. The project would start on January 1, 2021. BCRA currently owns the building where it conducts its other research activities. However, some of the office space in the building is unoccupied. BCRA intends to lease the unused office space to the British Columbia Department of Agriculture for four years starting January 1, 2021. The expected lease payments would be $10,000 per year payable at the start of each year. If the census project is accepted, BCRA would have to forego the lease as it would have to use the unoccupied office space in order to analyze the census data. Assume for convenience that all up-front costs of the project (office space improvements, furnishings, computers, etc.) will total $250,000 and that all the new assets will be placed in a CCA class with a rate of 25%. At the end of the project, BCRA believes that it can dispose of these new assets for $75,000. Since BCRA has many assets in this CCA class, neither terminal loss nor recaptured depreciation will be an issue. The contract would result in revenues of $175,000 in the first year of the project, and to combat inflation, these revenues would grow at 2% per year for the remaining years of the project. Incremental expenses associated with the project are projected to be $60,000 in the first year of the project and are projected to decline at 2% for the remainder of the project as operational efficiencies occur. Although additional employees will be hired, it is expected that some of BCRAs regular staff will have to put in overtime. It is expected that this overtime cost will be $25,000 per year for the duration of the project. Assume that all these cash flows occur at the end of each year of the project. You are a recent new employee in the finance department of BCRA, and you have been given the task of determining if the contract should be accepted. Naturally, your future with the company is highly dependent on your recommendation. You have been informed that BCRAs tax rate is 35% and that the cost of capital to be applied to projects such as this is 12%. Perform an NPV analysis to determine if the company should accept or reject the proposed contract. Solution (show all your work): i) Sunk Costs: ii) Initial Investment: iii) Opportunity Costs: iv) Incremental Revenues: v) Incremental Expenses: vi) PV of CCA tax shield: vii) PV of salvage: viii) Side effects: ix) NPV: x) Should the project be rejected or not, and why (two to three lines, maximum)?