Problem #2 (16 marks) In 2018, the Province acquired land adjacent to Laurie Park Campground in Grand Lake, NS. valued at $2,000,000. Today, the Province is considering possible uses for the land. One use would be to expand the Laurie Park Campground. The Province hired a firm of marketing consultants to do an analysis of the potential returns from this project. The consultants were paid $50,000. The consultants estimate that the initial investment (cost) for building campsites and other infrastructure on the land to be $850,000. The campsites and related infrastructure are expected to have a 10-year life. Revenue from campsite rentals are expected to be $250,000 per year with $100,000 of operating costs required to maintain the campsites and infrastructure. The Province uses a 7% discount rate to evaluate similar projects. Tax is not a consideration, as this is a government project a) What are the sunk costs in this project? (2 Marks) b) If the Province requires a five-year payback period; should the Province build this campground extension? Why or why not? Show your work. (5 Marks) c) Based on a NPV analysis, should the Province build this campground extension? Show your work. (6 Marks) d) The Province is considering an alternative use for the land. Instead of extending the Laurie Park Campground, it could build a Community Centre, which could earn rental revenue from community organizations and private gatherings. The consultants have evaluated this project and have determined the following: IRR of the campground project: 11.93% NPV of the pet supply product line: $150,000 IRR of the pet supply product line: 12.62% Which project should the Province accept? Explain