This is an engineering project scenario for a drone delivery system, and there are a few questions in regards to finance that I'm struggling with, I'll try outline the situation as best I can: A loan is to be taken out for construction cost - $22.5 million A separate loan is also taken out for purchase of drones at same interest rate - $587,500 Table 2 Expected loan draw down amounts for each year. Year of the $22.5m Loan Drawdown By the end of 1st Year By the end of 2nd Year By the end of 3rd Year By the end of 4th Year By the end of 5th Year Expected Loan Drawdown Profile Expected drawdown is 10% of total loan amount. Expected drawdown is 35% of total loan amount. Expected drawdown is 35% of total loan amount. Expected drawdown is 15% of total loan amount. Expected drawdown is 5% of total loan amount. Costs: . . Construction cost-$22.5 million. 25 drones - $23,500 each Interest on construction loan 2.02% per annum on $22.5 million, using table above Interest on drone loan 2.02% per annum on $587,500 only applicable after 4 years Operations and maintenance cost-$3.6 million per year, (only applicable after 4 years when construction and commissioning etc is done) Power cost-$2.4 million per year . Revenue streams - all revenue streams apply after 4 years when construction etc is complete. Delivery charges Table 1 Order values, delivery charge and expected number of orders per week. Order Value Up to $49.99 $50 - $99.99 Delivery Charge $N Expected Weekly Orders 3500 4500 $100 - $199.99 7500 3 $200 or more 12500 Advertising - $150,000 per year Power rebate due to solar - $350,000 (only after 6 years) Question: Your team has been asked to determine what the delivery cost, in terms of $N, needs to be set to, to be able to break even at the end of the 15-year time frame while also being competitive. a) Draw on one A4 sheet of paper and clearly label the pre-tax cash flow diagram for the total project showing all relevant contributing cash inflows and outflows b) The project is to break even at the end of 15 years. By calculating the value of $N, determine the delivery charges in dollar terms for each order value given that "Automated Parcel Delivery" company can negotiate an interest rate of 2.02% and 25 delivery drones are purchased. Also comment on the competitiveness of the calculated $N value (show your working and equations used*) c) Alternative Scenario: How many additional delivery drones can be purchased if the negotiated interest rate in this alternative scenario is 1.89% and the delivery price of $N is fixed at $20, given that you are still required to break even at the end of the 15-year time frame. (Show your working and equations used*) This is an engineering project scenario for a drone delivery system, and there are a few questions in regards to finance that I'm struggling with, I'll try outline the situation as best I can: A loan is to be taken out for construction cost - $22.5 million A separate loan is also taken out for purchase of drones at same interest rate - $587,500 Table 2 Expected loan draw down amounts for each year. Year of the $22.5m Loan Drawdown By the end of 1st Year By the end of 2nd Year By the end of 3rd Year By the end of 4th Year By the end of 5th Year Expected Loan Drawdown Profile Expected drawdown is 10% of total loan amount. Expected drawdown is 35% of total loan amount. Expected drawdown is 35% of total loan amount. Expected drawdown is 15% of total loan amount. Expected drawdown is 5% of total loan amount. Costs: . . Construction cost-$22.5 million. 25 drones - $23,500 each Interest on construction loan 2.02% per annum on $22.5 million, using table above Interest on drone loan 2.02% per annum on $587,500 only applicable after 4 years Operations and maintenance cost-$3.6 million per year, (only applicable after 4 years when construction and commissioning etc is done) Power cost-$2.4 million per year . Revenue streams - all revenue streams apply after 4 years when construction etc is complete. Delivery charges Table 1 Order values, delivery charge and expected number of orders per week. Order Value Up to $49.99 $50 - $99.99 Delivery Charge $N Expected Weekly Orders 3500 4500 $100 - $199.99 7500 3 $200 or more 12500 Advertising - $150,000 per year Power rebate due to solar - $350,000 (only after 6 years) Question: Your team has been asked to determine what the delivery cost, in terms of $N, needs to be set to, to be able to break even at the end of the 15-year time frame while also being competitive. a) Draw on one A4 sheet of paper and clearly label the pre-tax cash flow diagram for the total project showing all relevant contributing cash inflows and outflows b) The project is to break even at the end of 15 years. By calculating the value of $N, determine the delivery charges in dollar terms for each order value given that "Automated Parcel Delivery" company can negotiate an interest rate of 2.02% and 25 delivery drones are purchased. Also comment on the competitiveness of the calculated $N value (show your working and equations used*) c) Alternative Scenario: How many additional delivery drones can be purchased if the negotiated interest rate in this alternative scenario is 1.89% and the delivery price of $N is fixed at $20, given that you are still required to break even at the end of the 15-year time frame. (Show your working and equations used*)