Question: Develop a proposal for this case, if University Canada West wants to invest in a New Post Graduate Program. The Project under consideration costs $20

Develop a proposal for this case, if University Canada West wants to invest in a New Post Graduate Program. The Project under consideration costs $20 Million, has a 8 (eight) years life, and has no salvage value. Depreciation is straight-line to zero. The required rate of return is 19%. Sales are projected at 5,000 students per year. Tuition Fees per student will be $7,500. Variable cost per student will be $3,500, and fixed costs are $4.5 Million per year. Tax rate is 30%. Ignore CCA.

Your proposal should contemplate the following questions and problems:

Suppose you think that the number of students is accurate to within 15%. Calculate the upper and lower bounds for these projections. (BEST-case and WORST-case scenarios).

Calculate the Base-case NPV and IRR (5,000students/year).

Should UCW accept the project based on the base-case scenario?

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