Petaluma Chicken, Inc. is considering a new organic chicken farm to service it's western regional stores and has hired you asa consultant to make a recommendation. The stores currently require 500,000 birds per year and they are purchased from various local chicken farms for an average price of S3 per bird. that their new organic The managers believe the cost per bird to S4, while raising the average selling price to S8.50 per bird from $6.50 per bird now. However, due to the centralized structure of the is operation, shipping expenses will likely decrease from S1.00 per bird to S0.75. The firm feels it will need to increase its inventory of live birds by S15,000, and it will cost $150,000 to purchase the land, and S300,000 to construct the buildings and purchase equipment. In addition, labor expense is expected to rise by $130,000 per year. farm would raise The buildings and equipment will be depreciated using the straight-line method over five years to a salvage value of S100,000. After five years, the company will sell the farm for 300,000 (Base case estimate is $100,000 for the buildings and equipment and $200,000 for the land). The firms tax rate is 35% and be sure you remember that land is not depreciable. Given that, construct a spread sheet that calculates the initial outlay, after tax cash flows, and terminal cash flow for the project. The company's cost of capital is 1 1%, find NPV and IRR. Using that, decide if this is a go or no go project. Then do any other analysis you think might be useful to the CEO. When complete, construct a memo that will inform the CEO of your findings and your suggested course of action. Management is uncertain about several of the variables in your analysis and have asked you to provide three different scenarios. Best Case Expected Case Worst Case $100.000 130,000 140,000 S150,000 100,000 50,000 200,000 100,000 Create a scenario analysis showing the profitability measures for this investment using the information in the tale above. (Note: The salvage value of he buildings is the actual forecasted salvage value, not that used for depreciations.)