Perform the Cost Benefit Analysis for the given Scenario

$(40$ Points$)$

Cost per Widget

$2$ Shipping Cost per Widget

Per Widget GP

Gross Profit

Investment in raw materials

Investment in Land

Salvage value of land

Actual Sale of Land

Plant and Equipment

$\backslash$table$[[$Plant and Equipment$],[$Palivage value of Plant & Equipment$],[,$Actual Sale of Plant & Equipment,,,$],[\backslash$table$[[$Actual Sale of Plant & Equipment$],[$Depreciable P&E$]]],[,$fe of Project,,,years,,,,$],[,,,,,,,,],[,$ax Rate,,,,,,,$],[,$NACC,,,,,,,$],[,$Investmen$/$SSavings Rate,,,,,,,$],[9,\backslash$table$[[$What$\text{'}$s my initial outlay?$],[$Annual Change in After$-$tax Cash Flow$]],,,,$WI$,,,],[\backslash$table$[[30],[31]],$Terminal CashFlow,,,,,,CF$,$NPV$],[33,32,$Payback Period,,,$([5$ points$)],[(5$ moints $)],0,\backslash$table$[[2]],,],[34,$Discounted Payback,,,$\backslash$table$[[(5$ points$)],[(5$ points$)]],0,3,,],[35,$NPV$,,,\backslash$table$[[$ points$)],[(5$ points$)]]\{$f$5$c$753$c$40-0988-4428-$afe$5-$fcfe$01$f$9$f$215\},\frac{?}{\text{b}\text{a}\text{r}}(0),4,,],[35,$Profitability index,,,,$0,,,],[36,$IRR,,,$(5$ points$),0,,,],[37,$MIRR,,,$(5$ points$),,,,]]$

I buy Widgets from a wholesaler at $$3\mathrm{.}50$ each and sell them from my store in a strip mall for $$10\mathrm{.}00.$ It costs $$1\mathrm{.}50$ to ship them to my store, so I clear $$5\mathrm{.}00$ per Widget. Demand for my Widgets is $50,000$ units, so my Gross Profits are $$250,\frac{000}{?}$ year.

According to a trade organization, Price Elasticity models show if I could sell them for $$8\mathrm{.}00,$ I could sell $100,000$ units. I$\text{'}$d only make $$3\mathrm{.}00$ per unit, but my gross profit would increase to $$300,000.$ However, the increase in market share would eventually translate to more sales when customers return to buy new Widgets to replace their worn out Widgets. The risk of this model being wrong is very low since stores in other states have experienced similar volume increases.

With a sizeable investment, I could practically eliminate the shipping costs, and I know I could make them cheaper if I had the equipment. I would have to buy $$50,000$ in raw materials. Land about a mile away is available for $$150,000$ and it would cost $$350,000$ for the equipment and a building. My shipping costs would drop to only $15$ cents per Widget, and my cost per unit would only be $$1\mathrm{.}00.$

I$\text{'}$m not good a financial stuff, so a $$550,000$ up front cost doesn't seem worth it to me$,$ so I've asked you for your opinion.

The Building and Equipment depreciate over $5$ years with a salvage value of $$250,000.$ The land would appreciate in value to $275,000.$ My tax rate is $35\%$ and I can get a loan at $5\mathrm{.}8\%$ and my Money Market Savings Account earns $2\mathrm{.}29\%$

For the terminal cash flow, assume I will have and can sell my raw materials for the same $$50,000.$ This is not an annual expense since the cost of this material is in the Cost of Goods Sold $($Cost per Widget$).$ What do you think? Should I do it$?$