Description of analysis:

Josephine Joline Jones, Chief Financial Office of Jo Jo's Circus has been investigating opportunities to expand her operations. She has two projects that she is considering:

Project #1: Dancing Horses on Parade

• Requires the purchase and training of thoroughbred Clydesdale horses, estimated to cost $1,931,400 upfront.
• In addition, due to the seasonal and transitional nature of the circus industry, Jo Jo estimates that she will need to dedicate working capital of $38,000 at the beginning of the project. The $38,000 working capital will become available once the project's life is over.
• Jo Jo expects the project to yield positive net annual cash flows over the project's expected 8-year life as follows:
• End of 1st Year: $320,000
• End of 2nd Year: $384,000
• End of 3rd Year: $480,000
• End of 4th Year: $565,000
• End of 5th Year: $685,000
• End of 6th Year: $531,000
• End of 7th Year: $424,700
• End of 8th Year: $340,000
• Although Jo Jo full expects the project to be successful, she believes that the Net Annual Cash Flows may range between 80% and 120% of her estimates above.
• Jo Jo expects to retire and sell the horses at the end of the 8 years for $112,500.

Please use the attached template and construct an analysis for the project #1 (kindly include the references and Excel formulas)

Capital Budgeting Case Template Cash Flow Information Initial Investment Working Capital Salvage Value Expected Project Life (Years) Year #1 Year #2 Year #3 Year #4 Year #5 Year #6 Year #7 Year #8 Net annual operating cash flows nvestors Cost of Capital (Required Return 0 Initial Investment Net annual operating cash flows Working Capital Salvage value of equipment Total Net Cash Flows x present value discount factor Present Value of Cash Flows Net Present Value Recommendation? Low Confidence Net Present Value Recommendation? High Confidence Net Present Value Recommendation? Part 2 - Calculate the Internal Rate of Return of the Capital Investment: Intemal Rate of Return Recommendation? Low Confidence Intemal Rate of Retum Recommendation? High Confidence Intemal Rate of Retum Recommendation? Part 3 - Calculate the Payback Period of the Capital Investment: Today End of Year End of Year End of Year End of Year End of Year End of Year End of Year End of Year Payback Method 0 6 8 Cumulative Cash Flows Payback Year years Low Confidence Payback Year years High Confidence Payback Year years Part 4 - Calculate the Modified Payback Period of the Capital Investment: End of Year End of Year End of Year End of Year End of Year End of Year End of Year End of Year Modified Payback Method Today 5 Cumulative Cash Flows Payback Year years Low Confidence Payback Year years High Confidence Payback Year years