You are the analyst for a Pistol Petes Pizza Palace, a restaurant that is thinking of expanding their business to include catering for at least the next three years. To take on this project, the restaurant would need to purchase a van to transport food to customer locations. Two options are being explored. Purchasing a new van that is ready to go, or purchasing a used van that would require some customization, which would add to the initial cost. New Van Cost $65,000 Used Van Cost $48,000 Customization Expense $10,000 for the Used Van. With respect to these figures, experience suggests that the expected life for the project would be 3-years, based on IRS rules. The company will depreciate the equipment using the MACRS over the life of the project. Year 3-Year MACRS 1 33.00% 2 45.00% 3 15.00% 4 7.00% Both vans would be sold at the end of the project. The projected salvage value for the new van would be $25,000 at project end, while the used van could be expected to have a value of $10,500. A working capital requirement would arise at the time of the investment but would be released upon the termination of the project. For the old van, working capital would increase by $3,500 and for the new van, working capital would increase by $2,000. In addition to the cost estimates, expected earnings for the two investments would be as follows: Years 1-3 Annual expected earnings before taxes Used Van $28,000 New Van $30,000 Because this will increase their volume, food costs will also go up. For the used van, theyll spend an additional $5,000 per year and for the new van food cost will increase by $6,000 per year. The companys current WACC is 7.5%. However, if the Federal Reserve continues to raise interest rates, they estimate that their WACC will increase to 10%. Compare both projects at both WACC estimates so that Pistol Petes can make a plan based on both potential outcomes. Include a Cash Flow Statement