NOTE: For this project you must submit documents supporting your answers in the submission section $-$ showing step$-$by$-$step how you reached your answers. You can use excel to find the IRR only. Everything else must be shown as a calculation.

Module $4$ Assignment

You, as the project manager, have been asked to recommend which project your company should move forward with. Your company has a total of $$350,000$ in debt at $5\%$ interest and $$400,000$ in equity at $12\%$ rate of return.

Project $1$ is to build a medium$-$sized garage for a client over three years. The client will pay $$10,000$ as a deposit immediately, $$40,000$ the year after and $$85,000$ in the final year. Your company has a small loan of $$10,000$ with $5\%$ interest to go towards this project that must be paid back in the end. $$50,000$ of materials will be bought all at once in the first year. As well as a piece of equipment that requires a $$10,500$ down payment and yearly payments of $$1500$ following. Labor for the project is $$15,000$ immediately and $$6000$ per year after. Administration costs including taxes are $$4000$ for set up and $$1000$ per year after.

Project $2$ is the purchase and installation of a new piece of equipment for your company with a life span of $3$ years. The equipment costs $$50,000$ up front and $$9,000$ to run in the following years. You have the same sources of funding $($loan and investor$$s equity$)$ and administration costs as project $1.$ The equipment will save your company $$25,000$ beginning the year after installation and has a salvage value of $$12,000$ at the end of its lifespan.

Question $1$

$20$

Points

Organize a cashflow forecast for each project beginning at time $0.$ Make sure to include the net income for each year.

Project $1$

Year $0$

Year $1$

Year $2$

Beginning cash

Cash Receipts

Client Payments

$Blank $1$

$Blank $2$

$Blank $3$

Investor Proceeds

Other

$Blank $4$

Total

$Blank $5$

$Blank $6$

$Blank $7$

Cash Payments

Materials

$Blank $8$

Down and monthly payments for equipment

$Blank $9$

$Blank $10$

$Blank $11$

Labor Salary

$Blank $12$

$Blank $13$

$Blank $14$

other

$Blank $15$

$Blank $16$

$Blank $17$

Total

$Blank $18$

$Blank $19$

$Blank $20$

Net

$Blank $21$

$Blank $22$

$Blank $23$

Project $2$

Year $0$

Year $1$

Year $2$

Year $3$

Beginning cash

Cash Receipts

Savings $($revenue$)$

$Blank $24$

$Blank $25$

$Blank $26$

Investor Proceeds

Other

$Blank $27$

$Blank $28$

Total

$Blank $29$

$Blank $30$

Cash Payments

Materials

$Blank $31$

$Blank $32$

$Blank $33$

$Blank $34$

other

$Blank $35$

$Blank $36$

$Blank $37$

$Blank $38$

Total investment

$Blank $39$

Net

$Blank $40$

$Blank $41$

$Blank $42$

$Blank $43$