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 1is 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 1. 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 $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 1. a) How much is the initial (net) investment of the company for project 1? Answer: $Blank 1 Blank1 = Add your answer Question 3 1. b) How much is the initial (net) investment of the company for project 27 Answer: $Blank 1 Blank 1 | Add your answer 2. Evaluate each project by finding the following and show your work to receive full marks. EXCEL CAN BE USED FOR IRR ONLY. Everything else must be done by hand (you can drop the file showing your work in the additional content section: a) Weighted average cost of capital (WACC) (1 mark) Blank 1 b) IRR for both projects (2 marks) 1: Blank 2, 2: Blank 3 c) NPV for both projects (2 marks) 1: $Blank 4, 2: $Blank 5 d) Discounted payback period for both projects (2 marks) 1: Blank 6, 2: Blank 7 Blank 1 = Add your answer Blank2 Add your answer Blank3 Add your answer Blank4 Add your answer Blank5 Add your answer Blank 6 Add your answer Blank 7 Add your answer Based on the information provided, state whether the projects are independent or mutually exclusive, what your recommendation would be and why. Use the editor to format your answer If the salvage value was removed from project B and the materials in project A increased by $6,000, would your recommendation change