Can you please help me come up with the NPV, IRR, payback period and profitability index for project B (expansion to Europe). I have got several different calculations for it. This is all the information that is provided to find the results. And if possible, could you please help advise what would be the best project to undertake to answer the question: Which one of these projects will provide the most shareholder value to the company?

You work as a finance manager for Drill Tech, Inc., a mid-sizedmanufacturing company located in Minnesota. Three capital project requests were identified aspotential projects for the company to pursue in the upcoming fiscal year.

Project A: Major Equipment Purchase

• A new major equipment purchase, which will cost $10 million; however, it is projected to reduce cost of sales by 5% per yearfor 8 years.
• The equipment is projected to be sold for salvage value estimated to be $500,000 at the end of year 8.
• Being a relatively safe investment, the required rate of return of the project is 8%.
• The equipment will be depreciated at a MACRS 7-year schedule.
• Annual sales for year 1 are projected at $20 million and should stay the same per year for 8 years.
• Before this project, cost of sales has been 60%.
• The marginal corporate tax rate is presumed to be 25%.

Project B: Expansion into Europe

• Expansion into Western Europe has a forecast to increasesales/revenues and cost of sales by 10% per year for 5 years.
• Annual sales for the previous year were $20 million.
• Start-up costs are projected to be $7 million and an upfront needed investment in net working capital of $1 million. The working capital amount will be recouped at the end of year 5.
• Because of the higher European tax rate, the marginal corporate tax rate is presumed to be 30%.
• Being a risky investment, the required rate of return of the project is 12%.

Project C: Marketing/Advertising Campaign

• A major new marketing/advertising campaign, which will cost $2 million per year and last 6 years.
• It is forecast that the campaign will increase sales/revenues and costs of sales by 15% per year.
• Annual sales for the previous year were $20 million.
• The marginal corporate tax rate is presumed to be 25%.
• Being a moderate risk investment, the required rate of return of the project is 10%.