Charles was recently promoted to the position of Assistant Financial Manager in McKinsey Autoparks. He answers to his boss, Jane, who is the Financial Manager of McKinsey Autoparks. Currently, Charles has become acting Financial Manager until Jane returns from maternity leave. Charles has had no prior experience dealing with significant financial matters and doesn't want to make any mistakes. Therefore, Charles requires a detailed report from you, a talented group of MBA students, before finalizing any significant decisions. McKinsey Autoparks is a company that provides parking services to many Canadians in British Columbia. It thrived significantly in the past decade, earning revenue from almost 10,000 cars weekly. However, in the wake of climate change and improved public transportation, McKinsey Autoparks sees a steady decline in revenues. Therefore, they are considering purchasing a piece of land close to a major airport situated in Victoria. The land will be used to provide 800 car parking spaces. The cost of the land is $4,500,000. However, a further expenditure of $1,500,000 will be required immediately to develop the land to provide access roads and suitable surfacing for car parking. The company is planning to operate the car park for seven years, after which the land will be sold for $20,000,000 at Year 7 prices. A consultant has prepared a report detailing operating revenues and costs projected from this project. It can be estimated that the proposed car park will operate at 90% capacity during each year of the project. Car parking charges will be $60 per car, and it is assumed to remain the same for the entire project period. As there is a significant distance of 3 kilometers from the proposed car park to the airport, the company will be leasing several buses to transport passengers to and from the airport. The lease 9 costs are expected to be $85,000 per annum. The company will also require staff to maintain the proposed car park and usher passengers to the relevant bus to drop them off at the critical access point. $475,000 per annum will be needed to retain and provide this staff with their necessary salaries and benefits. The company will also hire a security system to protect the vehicles parked at the cost of $130,000 per annum. The company uses net present value when evaluating projects of this type. McKinsey Autoparks has a money cost of capital of 10% per annum. All cash flows apart from the initial investment of $4,500,000 can be assumed to occur at the end of the year. Charles has been tasked to evaluate the proposed expansion from a financial perspective. The company generally considers non-financial factors when evaluating projects of this nature. Required: Prepare a report on the following for Charles

; a) Evaluate the project from a financial perspective. You should use net present value (NPV) as the basis of your evaluation and show your workings in $000