Edmonds Manufacturing is located in the northwest region of the U.S. The company is experiencing tremendous growth in demand for its products. Management has discussed the distribution channel as an impediment to the companys ability to keep up with growing demand. Manufacturing facilities have excess capacity to meet increasing orders, but the company will have difficulty getting the products to the customers. The supply chain distribution manager has suggested investing in a project which will enhance the storage area near the distribution centre. After some collaborative research by the accounting and finance departments, the company found that a new project will cost $25,000,000 which will be financed with equity and cost of capital is 10%. Post tax cash flow is expected to be 12,900,000 for 10 years Distribution managers believe the new building will increase productivity to allow for additional sales of 500,000 units each year. Currently the existing facility is able to generate a demand of 1000,000 units /year. Marketing managers estimate the demand for the companys product will increase 750,000 units each year. *REQUIRED:* a) Calculate the NPV, IRR and discounted pay- back period for the project.

b) Perform a sensitivity analysis and find the NPV if initial investment and demand is increased or decreased by 10%. Analyse the situation

c) Calculate the breakeven NPV for the building project with the investment and demand. Analyse your answer.

d) Assume the company has another project in hand which yields similar benefits as mentioned in the above case study and has an expected return of 15% with a SD of 12.33. Should the company invest in the new project if the existing project has an expected return of 16.2% with a SD of 15.33. Analyse your answer.