FNCE 623 1 Homework NPV, IRR and other project evaluation criteria. Develop a proposal for the case if UCW wants to invest in a new Program. The project under consideration costs...

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FNCE 623 1 Homework NPV, IRR and other project evaluation criteria. Develop a proposal for the case if UCW wants to invest in a new Program. The project under consideration costs $7,000,000, has a 5 (five) years life, and has no salvage value. Depreciation is straight-line to zero. The required return is 17%. Sales are projected at 1,500 students/year. Tuition Fees per student will be $5,500. Variable cost per student will be $2,500, and fixed costs are $1,500,000 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). 1. Calculate the Base-case NPV and IRR (1,500 students/year). Should UCW accept the project based on the base-case scenario? 2. Calculate the BEST-case NPV and the WORST-case NPV and IRR If you look at best and worst-case scenarios, what else should be considered? Will you change your recommendation and why? 3. Calculate other project evaluation criteria that you learned from the textbook and lessons: - Payback period - discounted payback period - breakeven point - profitability index, - average accounting return and explain what it means in terms of this project, how it will influence your decision. Maximum grade: 10% of the total. See the rubric below. FNCE 623 2 Rubric: 0-40% 41-70% 71-90% 91-100% Question 1 3 out of 3 The answer is missing or very brief and/or the concepts are only minimally used, and/or calculations are incorrect The concepts are used but there are significant gaps/errors in calculations or in the application of concepts. The concepts are used but the answer could have more depth, minor errors in calculations Correct calculations and analysis using the concepts from the topics studied. Question 2 3 out of 3 The answer is missing or very brief and/or the concepts are only minimally used, and/or calculations are incorrect The concepts are used but there are significant gaps/errors in calculations or in the application of concepts. The concepts are used but the answer could have more depth, minor errors in calculations Correct calculations and in-depth analysis using the concepts from the topics studied. Question 3 4 out of 4 The answer is missing or very brief and/or the concepts are only minimally used, and/or calculations are incorrect The concepts are used but there are significant gaps/errors in calculations or in the application of concepts. The concepts are used but the answer could have more depth, minor errors in calculations Correct calculations and in-depth analysis using the concepts from the topics studied.