CHIP AHOY Co$.$ has been very successful developing cookies for retail purchase and bringing them to market. The company has historically focused on packaged cookies for home consumption. The retail snack food industry is competitive, and the CEO has recently become interested in expanding into other types of snack foods and has identified a project that looks promising.

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Engineers have identified expansion equipment that is for sale for $$3,000,000$ along with acquisition costs $($R&D$,$ Labor,

Maintenance, etc.$)$ are valued at $$180,000($total project cost of $$3,180,000).$ After breakeven calculations of the new snack food, it is forecasted that this equipment will bring $$340,000$ in sales per year for $10$ years. The equipment has $$500,000$ salvage value $10$ years from now $($assume a sale $10$ years from now$).$

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The current investments at CHIP AHOY are yielding a $10\%$ return. You have been asked to use this rate of return as your WACC in your analysis of this project. At the asking price, does an NPV analysis of this project indicate that it would be a good deal? What is the IRR of this project? The CEO is considering making an offer of $$2,180,000($inclusive of the $$180,000$ acquisition costs$).$ At what price range will the project generate an IRR sufficient to meet CHIP AHOY$$S return expectations?

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Prepare an Excel spreadsheet comparing the two cash flow streams. Identify and show the present values of the benefits and the present values of the costs. You will present and explain your calculations comparing the $$2,180,000$ offer and the $$3,180,000$ asking, and your plan to the CEO. The CEO has also asked you include the answers to the following questions in your analysis:

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$1.$ Without changing any of the cash flows, understanding this investment may be negotiated, what is the maximum amount Mr$.$ Ahoy should offer for this to remain beneficial? $($Compare this third amount in your Excel sheet.$)$

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$2.$ Do NPV and IRR analysis always agree on whether a proposed investment creates value for the firm? What evidence do you have?

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$3.$ Are there other capital budgeting techniques that we might use to evaluate this project? What are the Pros and Cons of each? Calculate at least two others as examples.

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$4.$ What considerations should Mr$.$ Ahoy be concerned with regarding TVM and Capital Budgeting?

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$5.$ What recommendations do you have for Mr$.$ Ahoy regarding developing effective decisions and actions for sustainable enterprise? Examples might include decisions due to Government regulations, research and development, changes in business strategy, etc.$).$ Be specific.