Please solve the question with details.

You are required to use a financial calculator or spreadsheet (Excel) to solve the following capital budgeting problem (sample questions and solutions are provided for guidance): Mandilly Industries is undertaking a series of significant cost saving changes to its operations effective immediately. It will cost the company $1,800,000 to implement the changes today. Over the next ten years, this will result in savings of $500,000 in each of the first three years, $200,000 in each of the four years following that, and $100,000 in each of the final three years.

(i) Develop the timeline (linear representation of the timing of cash flows).

(ii) Calculate the Payback Period (PB).

(iii) Calculate the Internal Rate of Return (IRR).

(iv) Calculate the Net Present Value (NPV) at the following required rates of return: (a) 8% (b) 10% (c) 12% (d) 14%

(v) Calculate the Profitability Index (PI) at the following required rates of return: (a) 8% (b) 10% (c) 12% (d) 14%

(vi) Using IRR and NPV criterion, comment if the project should be accepted or rejected at the following required rates of return: (a) 8% (b) 10% (c) 12% (d) 14%

(vii) Plot the Net Present Value profile (NPV on Y axis and rates of return on X-axis) (show this in a graph please)

HERE IS THE EXAMPLE

Sample Question and Solution Question: Your firm is considering an investment that will cost $1.5 million today. The project will produce cash flows of $350,000 in year 1, $390,000 in years 2 through 4, and $450,000 in year 5.

(i) Develop the timeline (linear representation of the timing of cash flows).

(ii) Calculate the Payback Period (PB).

(iii) Calculate the Internal Rate of Return (IRR).

(iv) Calculate the Net Present Value (NPV) at the following required rates of return: (a) 7% (b) 8% (c) 10% (d) 12%

(v) Calculate the Profitability Index (PI) at the following required rates of return: (a) 7% (b) 8% (c) 10% (d) 12%

(vi) Using IRR and NPV criterion, comment if the project should be accepted or rejected at the following required rates of return: (a) 7% (b) 8% (c) 10% (d) 12%

(vii) Plot the Net Present Value profile (NPV on Y axis and rates of return on X-axis).

Solution: (i) Timeline Years 0 1 2 3 4 5 Cash Flows -1,500,000 350,000 390,000 390,000 390,000 450,000

(ii) Payback Period = 3 + ($370,000/$390,000) = 3.9487 years

(iii) IRR: 9.48%

(iv) (a) NPV at 7% : $104,472.99 (b) NPV at 8%: $60,954.87 (c) NPV at 10%: ($20,701.52) (d) NPV at 12%:($95,805.96)

(v) (a) PI at 7%: 1.0696 (b) PI at 8%: 1.0406 (c) PI at 10%: 0.9862 (d) PI at 12%:0.9361

(vi) (a) At required rate of return of 7%, accept the project since IRR > 7% and NPV > 0 (b) At required rate of return of 8%, accept the project since IRR > 8% and NPV > 0 (c) At required rate of return of 10%, reject the project since IRR <10% and NPV <0 (d) At required rate of return of 12%, reject the project since IRR <12% and NPV <0

(vii) NPV Profile: NPV Profile 150,000 100,000 50,000 0 0% 2% 4% 6% 8% 10% 12% 14% -50,000 -100,000 -150,000 Required Rates of Return (this is the graph)