Project $2$ Calculations must be done in Excel $-$ You must create your own spreadsheet $($do not

copy and paste someone else's$).$ This question should be done using Method $1$ as outlined in

lecture $6($i$.$e$.$ Tax Effects, then Cash Flows then NPV$).$

As the financial advisor to Have Fun Manufacturing you are evaluating the following new investment in a

manufacturing project: $-$p

The project has a useful life of $8$ years.

Land costs $$10m$ and is estimated to have a resale value of $$25m$ at the completion of the project.

Buildings cost $$12m,$ with allowable depreciation of $8\%$ pa reducing balance and a salvage value

of $$10m.$

Equipment costs $$5m,$ with allowable depreciation of $15\%$ pa reducing balance and a salvage value

of $$1m.$ An investment allowance of $20\%$ of the equipment cost is available.

Revenues are expected to be $$13m$ in year one and rise at $5\%$ pa$.$

Cash variable costs are estimated at $40\%$ of revenue.

Cash fixed costs are estimated at $$3m$ pa$.$

The firm has spent $$2m$ on research and development for the project.

Managerial salaries of $$900,000$ will be allocated to the project, but these managerial positions will

be unaffected by the acceptance of the project.

An amount of $$200,000$ has been spent on a feasibility study for the new project.

The project is to be partially financed with a loan of $$14m$ to be repaid annually with equal

instalments at a rate of $3\%$ pa over $8$ years.

Except for initial outlays, assume cash flows occur at the end of each year.

The tax rate is $30\%$ and is payable in the year in which profit is earned.

The after$-$tax required return for the project is $12\%$ pa$.$

Tasks

$($a$)$ Calculate the NPV$.$ Is the project acceptable? Why or why not? Explain and defend your processes,

answer, and calculations clearly.

$($b$)$ Conduct a sensitivity analysis showing how sensitive the project is to revenues, fixed costs and to the

required rate of return. Explain and defend your processes, answer, and calculations clearly. I need the answered excel sheet for the question please.