Quetion Eour [25 marks 1 Bucholz Brands is cansidering the development of a nene ketehup peoduct. Ihe ketehup will be sold in a veriety of different colocs and will be mericted to young childrem. In evelusting the propased project, the campeny has callected the folloning information: - The compeny estimates that the project will lest far four years. - The compeng null need to purchase nene machinery that has an up-front cost af $300 million. At t=4, the machinery hes an estimated selvage value of $50 million. - The machinery wall be degereciated on a 4-year straight-line basis. - Prodaction an the new ketchup geoduct will take place in a recentiy vacated facility that the campany owns. The facility is empty and Bucholz does not intend to lease the fecility: - The praject will require a $60 million imventary at the start. The compamy expects that accounts peyable of 510 million is meeded at the commemcement of the said project Any tnet operating working captel w.Ill be recovered when the geject as completed. - The campany estimetes that sales of the new ketchug will be $200 million each of the next four years. - Ihe operating costs, excluding degereciation, are expected to be $100 million eech year. - Ihe compeng's ter rate is 40 percent. - The projects are eveluated based on the weighted swerage cost af capital. AII projects art financed writh 5096 debe which hes a gross cast of 10%6. Whille the cost of equity is determined by the capitel asset pricing model. The risk free rate an debt securibes is currently 6% and the return on the market is 12:6. The emcity's beta is currencly 1.50 . Required: a) Determint the entity's weighted swerage cost of ceptel. [ 5 marks ] b) Advise manngement on the besis of the net present value techniques whether or nat the praject is feasible. [16 Marlas] c) Explain nhy sumle costs should not be included in a capital budgeting anslysis. (4 marks)