Using a spreadsheet answer the questions below. Marks will be awarded for presentation. Steps: 1. Open a blank Excel worksheet 2. Write your name on all worksheets 3. Only one file should be used.

Bizz Ltd, a house-building company, plans to build 100 houses on a development site over the next four years. The purchase cost of the development site is $4,000,000, payable at the start of the first year of construction. Two types of houses will be built, with annual sales of each house type expected to be as follows.

year	1	2	3	4
Number of small houses sold	15	20	15	5
Number of large houses sold:	7	8	15	15

Houses are built in the year of sale. Each customer finances the purchase of a home by taking out a long-term personal loan from their bank. Financial information relating to each type of house is as follows:

	Small House	Large House
Selling price	200,000	350,000
Variable cost of construction	100,000	200,000

Selling prices and variable cost of construction are in current price terms, before allowing for selling price inflation of 4% per year and variable cost of construction inflation of 5% per year. Fixed infrastructure costs of $1,500,000 per year in current price terms would be incurred. These would not relate to any specific house, but would be for the provision of new roads, gardens, drainage and utilities. Infrastructure cost inflation is expected to be 1.5% per year. Bizz Ltd pays tax at an annual rate of 30% in the year in which profits are made. The company can claim capital allowances on the purchase cost of the development site on a straight-line basis over the four years of construction. Bizz Ltd uses a discount rate of 13% for such projects

Required:

(a) Calculate the net present value of the proposed investment. (5 Marks)

(b) Graphically, what is the Internal rate of return of the project? (1 Mark)

(c) Using scenario manager find the net present value at the following cost of development $ 2m, $ 2.5m, $ 3m and $ 5m. (2 Marks).

(d) Using Solver find the discount rate that will give Net Present Value of $180,000. (2 Marks)

(e) What are Overhead costs? How are overhead costs treated in Capital Budgeting decisions. (2 Marks)