Josephine Joline Jones, Chief Financial Office of Jo Jo's Circus has been investigating opportunities to expand her operations. She has two projects that she is considering:

Project #2: Expand concessions and gift shops

• Requires the purchase and customization of portable facilities and equipment, estimated to cost $772,500 upfront.
• In addition, again due to the seasonal and transitional nature of the circus industry, Jo Jo estimates that she will need to dedicate working capital of $10,500 at the beginning of the project. The $10,500 working capital will become available once the project's life is over.
• Jo Jo expects the project to yield positive net annual cash flows over the project's expected 6-year life as follows:
• End of 1st Year: $281,300
• End of 2nd Year: $259,000
• End of 3rd Year: $236,300
• End of 4th Year: $202,500
• End of 5th Year: $157,500
• End of 6th Year: $112,500
• Given Jo Jo's management team's experience with concessions and gift sales, Jo Jo feels confident that the net annual cash flows will be between 90% and 110% of the above estimates.
• Jo Jo expects to scrap the concession and gift shop facilities and equipment at the end of the 6 years for $8,000.

Jo Jo's investors require 15% return on their invested cash each year. The circus has managed to secure a tax haven such that they do not expect to pay any income taxes over the foreseeable future.

Please use the attached template and do the project #2 analysis (kindly include references, Excel formula, etc)

B D E G H Capital Budgeting Case Template Cash Flow Information Initial Investment Working Capital Salvage Value Expected Project Life (Years) Year #1 Year #2 Year #3 Year #4 Year #5 Year #6 Net annual operating cash flows Investors Cost of Capital (Required Return) Today End of Year End of Year End of Year End of Year End of Year End of Year 5 6 Confidence Initial Investment Net annual operating cash flows Working Capital Salvage value of equipment Total Net Cash Flows x present value discount factor Present Value of Cash Flows Net Present Value Recommendation? Low Confidence Net Present Value Recommendation? High Confidence Net Present Value Recommendation? Part 2 - Calculate the Internal Rate of Return of the Capital Investment: Intemal Rate of Retum Recommendation? Low Confidence Intemal Rate of Retum Recommendation? High Confidence Intemal Rate of Retum Recommendation? Part 3 - Calculate the Payback Period of the Capital Investment: Today End of Year End of Year End of Year End of Year End of Year End of Year Payback Method 0 5 6 Cumulative Cash Flows Payback Year years Low Confidence Payback Year years High Confidence Payback Year years Part 4 - Calculate the Modified Payback Period of the Capital Investment: End of Year End of Year End of Year End of Year End of Year End of Year Modified Payback Method Today 5 6 Cumulative Cash Flows Modified Payback Year years Modified Low Confidence Payback Year years Modified High Confidence Payback Year years