In the spring of 2021, your friend inherited a commercial real estate property in the Madison Park area of Cape. This property is located in the heart of an expensive residential area on the west side of Lake Cape. Currently the property has a 3,000 square foot one story building that contains a convenience store (a small grocery store). Your friend now owns and operates the store which is only moderately profitable. She is considering changing how this property is being utilized. Her strategy is to close the convenient store and renovate the building to open a coffee shop that also serves light healthy lunches and dinners. She has come to you for advice and is hoping you would analyze this decision and provide a recommendation on whether she should close the convenience store and renovate the building to open the coffee shop. Assume the renovation will start (time 0) as the end of 2021 (12/31/2021). Additionally, your friend has stated that she is planning on living in this area for another 10 years and is likely to sell the property at that time. Assume the sale price in 10 years will be the same regardless of the decision to renovate or not. The revenue from the convenience store is expected to be $370,000 in 2021 and, based on recent growth, the forecasted revenue in 2022 is $380,000. After 2022, revenue is expected to grow by 2% per year in the future. The operating margin of the convenience store is expected to stay constant overtime at 8%, there is no depreciation expense, and working capital is historically 10% of revenue. The expected costs of renovating the building are $950,000 and it will take six months to complete the renovation (assume cash outflow for the renovation occurs at time 0). The renovation expense falls into the 10-year depreciable life. Assuming the renovation is completed by June 30th, 2022, the revenue from operating the coffee shop over the remaining six months of 2022 is expected to equal $180,000. Revenue in 2023 is expected to equal $380,000 and revenue in 2024 is expected to equal $510,000. The expected annual growth in revenue is 8%/year from 2025 to 2029 and then revenue is expected to increase by 4% per year after 2029. The expected operating margin (excluding depreciation expense) is 30%, and the required working capital will be 5% of revenue. To finance the renovation your friend will invest $300,000 from her savings and has secured a bank loan for the remaining $650,000 at a rate of 6%/year. Assume, given the risk of this investment, that she will require a 10%/year return on her $300,000 equity investment. The expected income tax rate is 20% for both businesses. Assume your friend has enough income from her current job to benefit from a potential tax savings from any losses created from the coffee shop in its early years. After estimating incremental after-tax cash flows from the renovation of the Madison Park property, calculate the NPV, IRR, and the Payback Period to provide a recommendation to your friend. Please provide a short memo written to her (no more than one or two pages) describing your process, results, and the implication of your analysis for your friends decision to renovate followed by your Excel spreadsheets (consider your audience, your friend, when constructing the memo). Note: A MACRS Depreciation Schedule to be used to calculate depreciation expense from the renovation is provided on the following page.