Question 4 Capital Budgeting - Different PVCCATS and Growing Revenues (25 Points) Source: https:torontosun.comr'newsflocal-newslwarmington-homeless-enjoy-fancy-food-after-anthony-rotas- garden-party-cancelled (Preambie: In Question 3, you found that the federal government was printing money causing high inflation. Some of the printed money were used to fund lavish parties for sitting MPs and government media journalists. Some of these parties were later cancelled as you read from the above source article. As the federal government had already paid for the expensive food and alcohol, these lavish parties for MP5 and journalists continued to impose an "ination tax" on Canadians.) After Ronsangeis went bankrupt, Matthew decided to retire from the for-profit sector and work to help the homeless acquire funds to pay rents. He read in the Toronto Sun that lavish parties thrown by the federal government were being cancelled with high-end food and drinks later donated to homeless shelters. The food included seared and crusted scallops, poached shrimp, pulled beef barbacoa and lamb meatballs. Instead of eating the luxurious food, Matthew thought the homeless could open a high-end restaurant in Ottawa to generate positive NPV and the profits could be used by the homeless to pay rents, and the homeless could work and earn wages there to pay rents too. Matthew then donates office space he owns in Ottawa for a high-end restaurant called Vagrance. Restaurant equipment will cost $5 million, including renovation costs for the office space. Vagrance will also require an initial investment of $1 million in net working capital and will generate pre-tax revenues that are $3 million for the first year. The pre-tax revenues will grow at an annual rate of 2.5 percent for the next 14 years as the federal government throws more lavish parties for journalists which are later cancelled. The pre-tax operating costs are low as most of the high-end food is donated from cancelled parties and will only be $1 millionlyear for the 15 years, mostly to pay wages for the homeless and to keep the dcor and food at Vagrance fresh. The salvage value of restaurant equipment will be $1 million at the end of year 15. The initial equipment purchased falls into a CCA Asset Class 8 at a rate of 20 percent. The corporate tax rate is 40 percent and the cost of capital is 15 percent. Assume the initial working capital investment will be made at the time of the purchase of the equipment and recovered or returned at the end of year 15. For simplicity, all cash flows for a given year occur at the end of the year. a. What are the NPV and IRR in 2023 of Vagrance? Do the calculations by hand (with a calculator) to practice for the final exam and submit your handwritten answer. (8 points) Adjust the formulas in the Excel spreadsheet "Use Solver or GoafSeek to get fRR-l'ecture 5 6" (please download from eclass) to calculate a growing annuity of revenues and to incorporate the net working capital investment and recovery. Then input the numbers into the Excel spreadsheet and check your NPV and IRR calculations for 2023. b. Write down the changes you made to the Excel spreadsheet to calculate the NPV of Vagrance in 2023. (It is very important to know what changes to make to the Excel spreadsheet to solve a particular NPV problem. You may be asked a similar question on the final exam which would involve different changes made to the spreadsheet.) Submit your handwritten answer. (5 points) c. Print out the page in pdf which shows the NPV in 2023 calculated by Excel. You must submit this Excel page. (1 point) d. Now use Solver to find the IRR in 2023. Print out the page in pdf which shows the IRR calculated by Goalseek or Solver. You must submit this Excel page. (1 point)