Financial Management MGMT8500 Alternative Assignment Tech Help Inc. has been offered a new contract. The firm needs to determine whether the contract will be profitable. The new contract will generate 800 billing hours at $125 per year for 5 years. The variable costs, labour will be $32 an hour (including fringe benefits). The fixed costs include 3 vehicle for the employees to service customers at their locations will be $500 per month per car. Other fixed costs will remain the same for the company as a whole but will be allocated to this project at $1,500 for the receptionist and office supplies per month. The company tax rate is 28%. If Tech Help goes ahead with this project, it will lose 2,000 in net income per month. Calculate the NPV using a discount rate of 10% in an excel document. Show the yearly incremental cash flows for this project and then calculate the NPV by discounting the net yearly cash flows. Advise your firm whether it should accept or reject this contract. Use the attached template for your response. Required 1. List all relevant costs. 2. 3. Calculate the incremental cash inflows (the revenue the project will generate) Calculate the total yearly costs. Calculate the yearly incremental cash flows. 4. 5. Calculate the NPV of the project. 6. Accept or reject the project. Topic Marks Relevant costs 15 Incremental cash inflows (the revenue the project will generate) 5 Total yearly costs 15 Yearly incremental cash flows 5 NPV of the project 20 Decision 10 Powered by WPS Office Cover Sheet 1. Relevant Cost Calculation Marking K A B D F G E Category (Variable / Fixed / Opportunity) Cost item Amount Changing (Y/N) Relevant Cost (Y/N) 1 234567899HQSHEED 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 D E LL G H 1 A B Marking Key Si no Data Section: Cash Inflow parameters >> Cash Outflow parameters >>> hours labour/hr Revenue/hr Fixed cost / month/car Months/yr Opportunity # of cars Project parameters Tax rate Disc rate Contract period (yrs) HORDBEB00o vou Awn 2 Cash inflows 3 Total yearly cost Variable costs Fixed costs Total cost Gross Income Less: Taxes Net Income Opportunity cost Yearly Incremental Cash 4 Year Yearly incremental cashflow NPV 5 6 Decision 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105