Caterpillar Company has an opportunity to supply Heavy Duty Trucks to Skanska, a Swedish construction company based in the United States. Skanska will pay $4 million upfront when the contract is signed and $3.2 million one year later. Caterpillar had obtained the loan from JP Morgan, prior to the initial payment from Skanksa, and invest $2 million from it at the beginning of the project. Subsequently, Caterpillar spends $2 million, $3 million, $3.5 million, $2 million and $1.5 million as running cost for the first, second, third, fourth, and fifth year respecitvely. Skanska will take delivery of the truck during Year 4, and agrees to pay $7 million at the end of that year and the $5.5 million balance at the end of year 5. The outcome of the rate of return on this investment as compared with the minimum attractive rate of return (MARR) will determine if Caterpillar will continue to sustain their current staff strength or they will cede to the option of downsizing after the completion of the 5-year deal. Caterpillar management requested their project management team to conduct an economic analysis on the proposed venture (project) so that they can be better informed on policy formulation in readiness for any exigency that may result from the project. These exigencies include but are not limited to: downsizing, staff retainment, salary freezing, salary cut or closing down some of their plants since they are a multinational company. The project managment team is planning to approach the task as follows:

1. Generate a table depicting the cash flow estimates for the project.

2 Draw the cash flow diagram for the cash flow estimates.

3. Determine the number of rates of return values this project is likely to have.

4. Obtain the values for the rate of return using Microsoft Excel. These values should be obtained by plotting the Present Worth against the range of rate of return values (0% to 80% step increase of 10%).

5. Caterpillar management have set a MARR of 15% for any of their project; you will advise Caterpillar to embark on this project knowing the net positive cash flow received from Skanska is reinvested at 30%. The loan Caterpillar obtained from JPMorgan for the production of the truck is borrowed at a rate of 10%.