1. Walton Enterprises, Inc. is considering a proposal for a joint venture that will require an initial investment of $13,000,000. At the end of the fifth year, Waltons joint venture partner will buy out Waltons interest for $10,000,000. Walton expects the project to generate cash flows of $3,000,000 during the investment holding period. Waltons CFO indicated that 12 per cent is the firms required rate of return. Required:

a. Construct a discounted cash flow (DCF) model and calculate the proposals net present value (NPV) and internal rate of return.

b. Based on your calculations above, make a summary recommendation (in one sentence) to the CFO concerning whether Walton should enter this joint venture.