The Groot is a national pie shop brand in the country of Belarus. The Groot decides to open a new pie shop in a city called Zloda. On the 1st of January 2019 , it spends $800,000 to purchase the land of this shop. The Groot spends $1,800,000 in total for the shop's exterior decoration. This cost is paid in ten equal instalments payable monthly in advance (i.e., each payment equals to $180,000 ). The first payment occurs on the 1st of October 2019. The Groot plans to open this shop on the 1st of May 2020 . The numbers of pie it expects to sell each month are provided in the Excel 'STAT2032 Assignment Excel Template' (with the spreadsheet tab name 'Q2_input_data'). Each pie sells for $6. The revenues from pie sales are received continuously during each month. The Groot spends $10,000 per month to pay for staff salaries of this shop. This payment is made continuously from the 1st of May 2020 . This cost increases every 1st of September by 3% per annum effective (i.e., this cost remains constant for a year after each jump). The risk discount rate (RDR) is 10% per annum effective. All revenues and costs will cease at the end of 2030 . a) Calculate the net present value (NPV) for the shop at the beginning of 2019. Discuss whether this shop is profitable or not based on the results. b) Calculate the discounted payback period (DPP) for the shop (to the nearest month). c) Calculate the internal rate of return (IRR) for the shop (to the nearest four decimal places). Hint: for all parts from Question2, please show all your workings in the Excel 'STAT2032 Assignment Excel Template' with spreadsheet tab name 'Q2_working'. Show the final answer for each part in the Excel 'STAT2032 Assignment Excel Template' with spreadsheet tab name 'Q2_answer'. Do NOT include any discussions of Question2 in your assignment answer sheet (as they will NOT be marked). [18+4+4=26Marks] The Groot is a national pie shop brand in the country of Belarus. The Groot decides to open a new pie shop in a city called Zloda. On the 1st of January 2019 , it spends $800,000 to purchase the land of this shop. The Groot spends $1,800,000 in total for the shop's exterior decoration. This cost is paid in ten equal instalments payable monthly in advance (i.e., each payment equals to $180,000 ). The first payment occurs on the 1st of October 2019. The Groot plans to open this shop on the 1st of May 2020 . The numbers of pie it expects to sell each month are provided in the Excel 'STAT2032 Assignment Excel Template' (with the spreadsheet tab name 'Q2_input_data'). Each pie sells for $6. The revenues from pie sales are received continuously during each month. The Groot spends $10,000 per month to pay for staff salaries of this shop. This payment is made continuously from the 1st of May 2020 . This cost increases every 1st of September by 3% per annum effective (i.e., this cost remains constant for a year after each jump). The risk discount rate (RDR) is 10% per annum effective. All revenues and costs will cease at the end of 2030 . a) Calculate the net present value (NPV) for the shop at the beginning of 2019. Discuss whether this shop is profitable or not based on the results. b) Calculate the discounted payback period (DPP) for the shop (to the nearest month). c) Calculate the internal rate of return (IRR) for the shop (to the nearest four decimal places). Hint: for all parts from Question2, please show all your workings in the Excel 'STAT2032 Assignment Excel Template' with spreadsheet tab name 'Q2_working'. Show the final answer for each part in the Excel 'STAT2032 Assignment Excel Template' with spreadsheet tab name 'Q2_answer'. Do NOT include any discussions of Question2 in your assignment answer sheet (as they will NOT be marked). [18+4+4=26Marks]
