Jon Jeffries has been the Chief Financial Officer $($CFO$)$ for Rich Manufacturing for nearly $20$ years. Rich

Manufacturing owns the factory building that houses its operations, but the company's production levels are

nearing maximum capacity for the factory building's size. The company is considering expanding and possibly

constructing a new larger factory building to house all of its operations. Construction of the new factory building is

expected to cost $$4,000,000,$ and the building is expected to have a $14-$year life. Nicole Rice, the company's Chief

Executive Officer $($CEO$),$ has asked Jon to "run the numbers" and come up with a recommendation for approval or

rejection of the expansion project to be presented to the company's board of directors. Nicole reminds Jon that

the company must have a rate of return of at least $6\%$ on the investment. After carefully analyzing the numbers,

Jon estimates that the expansion project could produce maximum additional future annual cash flows of $$430,000.$

The present value factors from the Present Value of an Annuity of $$1$ Table for $14$ periods are as follows:

REQUIRED:

Calculate the Net Present Value $($NPV$)$ of the expansion project. Assume that the factory building will

have no salvage value. Show all of your calculations. $(4$ points possible.$)$

Calculate the Intemal Rate of Return $($IRR$)$ for the expansion project. Show all of your calculations. $(4$

points possible.$)$

Based on the results of your NPV and IRR calculations above, should Jon recommend approval or rejection

of the expansion project? Provide explanations for your answer. $(4$ points possible.$)$

Jon's sister, Jan, has just started up a new construction company that specializes in the construction of

commercial buildings. Jon is extremely eager to see his sister's company get off the ground and become

successful. Five years ago, Jan's husband was severely injured during combat while serving with the

United States Army, leaving him totally and permanently disabled. Since her husband's injury, Jan has

become very involved with the Wounded Warrior Project, serving as Chairman for the charitable

organization's local chapter. She is also involved with several other charities in the area that provide food

and other necessities to the homeless. Jan has pledged to donate $10\%$ of the net profits from her new

construction business to charity. Jon knows that a $$4,000,000$ construction project like the one being

proposed by Rich Manufacturing could be life$-$changing for Jan's new company, her family, and countless

individuals impacted by the charitable organizations Jan is involved with. Jon could easily $($and discreetly$)$

increase the estimated future annual net cash flows for Rich Manufacturing by a small amount

$($approximately $$10,000$ per year$),$ thereby changing the results of the calculations supporting a different

recommendation to Rich Manufacturing's board of directors. Explain why Jon should or should not

consider doing this. Your explanation should be at least one paragraph long $($typed$,$ double$-$spaced,

preferably in a Word document$)$ and should include adequate reasoning supporting your conclusion after

considering all of the circumstances. $(18$ points possible.$)$