Jane has the opportunity to expand her business one of two ways:

1. For $50,000 she can open a new store. She will use a 7% loan to finance 100% of this project. She expects to need an additional $10,000 up front to purchase inventory and other working capital items. She will operate the store for 3 years and will sell it for $80,000 at the end of year 3, at which time she will recover her working capital. She expects to make $1,500 in year 1, $2,000 in year 2 and $3,000 in year 3 before selling the store.

2. For $75,000 she can open a web site retail business. She will finance this with a 10% loan. It is a higher rate as it is not secured by real estate. She will not need any additional working capital to start this business. She expects to make 5,000 in year 1, $6,000 in year 2, $7,500 in year 3 and $10,000 for years 4-7. At the end of year 7 she expects to sell his business for $100,000.

Using Excel, prepare a statement showing investment and cash flows by year. Calculate the NPV and IRR for each of these projects. Write a recommendation as to which project she should pursue and support this with information from your calculations. She cannot due both projects.

Please make an excel spreadsheeet of all this data and post the link