Risk and NPV; Sensitivity Analysis J. Morgan of SparkPlug Inc. has been approached to take over a production facility from B.R. Machine Company. The acquisition will cost $1,500,000, and the after-tax...

Risk and NPV; Sensitivity Analysis J. Morgan of SparkPlug Inc. has been approached to take over a production facility from B.R. Machine Company. The acquisition will cost $1,500,000, and the after-tax net cash inflow are expected to be $275,000 per year for 12 years. SparkPlug currently uses 12% for its after-tax cost of capital. Tom Morgan, production manager, is very much in favor of the investment. He argues that the total after-tax net cash inflow is more than the cost of the investment, even if the demand for the product is somewhat uncertain. “The project will pay for itself even if the demand is only half the projected level.” Cindy Morgan (corporate controller) believes that the cost of capital should be 15% because of the declining demand for SparkPlug products. Required 1. What is the estimated NPV of the project if the after-tax cost of capital (discount rate) is 12%? Use the built-in NPV function in Excel; round your answer to the nearest whole dollar.  2. What is the estimated NPV of the project if the after-tax cost of capital (discount rate) is 15%? Use the built-in NPV function in Excel; round your answer to the nearest whole dollar.  3. Use the built-in function in Excel to estimate the project’s IRR, rounded to 1 decimal place.  4. Use the Goal Seek function in Excel to calculate the maximum amount (rounded to the nearest whole dollar) that can be invested up front in order to generate an economic rate of return (i.e., IRR) equal to the 15% rate of return specified by management as appropriate for the proposed investment. (The following online tutorial regarding the use of the Goal Seek option in Excel may be consulted: https:// support.office.com/en-us/article/Use-Goal-Seek-to-find-the-result-you-want-by-adjustingan-input-value-320cb99e-f4a4-417f-b1c3-4f369d6e66c7?ui=en-US&rs=en-US&ad=US.) 5. Is adjusting the discount rate or the desired rate of return an effective way to deal with risk or uncertainty?