Compuland Corporation is an established company based in Ramland (a fictitious country) and uses the Ramland $ as its currency. The company buys computer equipment and then re-sells it in a chain of retail stores. It has been operating in this way since it was established in 2010. The company is financed entirely by ordinary shareholders (common stockholders) and has no external debt in the form of loans payable. The shareholders have expectations of an annual return of 12% on their investment. Inflation in Ramland is negligible. Compuland Corporation is considering investing in a new project. This project is the creation and operation of a new online retail channel called Onlinio to start operational life on 1st July 2023. This new retail outlet will not sell computer equipment in physical retail outlets but will sell direct to purchasers who will pay for purchases through credit card payments and bank transfers (both thus effectively being cash payments). The project will operate initially for a period of four (4) years. Compuland Corporation's senior management team is of the view that the proposed project will require no loans as it will be funded by cash already held by the company, generated from previous profitable, cash generating operations. The following information is available in relation to the new project: a) Annual sales in Year 1 are projected to be $2,500,000, increasing by $200,000 in each subsequent year across the project's operational life. b) Annual variable costs are projected to be 30% of annual sales in each year. c) Staff salaries, all fixed, will total $400,000 in each operational year, paid in cash on a monthly basis. These salaries relate to four (4) staff members each earning $50,000 annually. Three (3) of those staff members have been employed by Compuland Corporation for the past five (5) years and would have been made redundant, receiving in total $243,876 as redundancy pay in cash, if the new project had not identified and proposed. The other one (1) member of staff will be a new one, employed for the operational life of the project. d) Annual administration overheads relating to Onlinio will be $400,000,50% of which will be an allocation of Compuland Corporation's existing head office administration costs which will be charged to the new project, and 50% overheads which do not currently exist. e) Marketing and advertising costs will be $100,000 annually, paid in cash. f) Equipment will be purchased at a cost of $4 million. Equipment is depreciated on a straight-line basis over four (4) years based on purchase price less anticipated residual value at the end of Year 4 . That anticipated residual value is $ zero ($0). g) Land and buildings will be purchased at a total cost of $2 million, of which $200,000 has already been spent. Land and buildings are not depreciated. It is anticipated that land and buildings will have a residual value at the end of Year 4 of $2.4 million. At the end of the initial operational four (4) years the land and buildings will either be retained if the project continues or sold. If sold, no tax would be payable on any profits/losses on disposal. h) Corporation taxation is 20% and is expected to remain at this rate for the foreseeable future. i) Tax is paid one year in arrears. j) The project will require investment in working capital in advance of Year 1 operations, with the investment being 20% of the projected average annual sales over the operational life of the project. This sum will be realised from the project at the end of Year 4. The company uses both profit after tax forecasts and net present value calculations (NPV) within its CAPEX appraisals, interrogating the calculations to provide insights into the decisions to proceed or not with any proposed projects. Required Advise the senior management team of Compuland Corporation whether to proceed with this new venture. Support your advice with articulation of your reasoning and justification, and calculations as appropriate. In so doing: a) Calculate and show the profit calculation for each of the four (years). Locate your calculations/profit calculations in an appendix. Calculations in the appendix are not included in maximum word count. [Carrie; 24% of marks available in section 1] b) Prepare a schedule of annual, including time zero, incremental cash flows, and apply the appropriate discount factor to determine the proposed project's net present value (NPV). In applying the appropriate discount factor you may use the discount factors detailed in the discount tables located on the final page of this assignment brief or the auto-discounting function in Excel (or other software)