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Leon Mitchell has been the Chief Financial Officer $($CFO$)$ for Tatum Manufacturing for nearly $20$ years. Tatum Manufacturing owns the factory building that houses its operations, but the company's production levels are nearing maximum capacity for the factory building's size. The company is considering expanding and possibly constructing a new larger factory building to house all of its operations. Construction of the new factory building is expected to cost $$6,000,000,$ and the building is expected to have a $14-$year life. Manuel Garcia, the company's Chief Executive Officer $($CEO$),$ has asked Leon to "run the numbers" and come up with a recommendation for approval or rejection of the expansion project to be presented to the company's board of directors. Manuel reminds Leon that the company must have a rate of return of at least $6\%$ on the investment. After carefully analyzing the numbers, Leon estimates that the expansion project could produce maximum additional future annual cash flows of $$640,000.$ The present value factors from the Present value of an Annuity of $$1$ Table for $14$ periods are as follows:

Periods

$4\%$

$5,5$

$6\%$

$7\%$

$14$

$10\mathrm{.}5631$

$9\mathrm{.}8986$

$9\mathrm{.}2950$

$8\mathrm{.}7455$

REQUIRED:

Calculate the Net Present Value $($NPV$)$ of the expansion project. Assume that the factory building will have no salvage value. Show all of vour calculations. $(4$ points possible,$)$

Calculate the Internal Rate of Return $($IRR$)$ for the expansion project. Show all of vour calculations. $(4$ points possible.$)$

Based on the results of your NPV and IRR calculations above, should Leon recommend approval or rejection of the expansion project? Provide explanations for vour answer. $(4$ points possible.$)$

Leon's sister, Pam, has just started up a new construction company that specializes in the construction of commercial buildings. Leon is extremely eager to see his sister's company get off the ground and become successful. Five years ago, Pam's husband was severely injured during combat while serving with the United States Army, leaving him totally and permanently disabled. Since her husband's injury, Pam has become very involved with the Wounded Warrior Project, serving as Chairman for the charitable organization's local chapter. She is also involved with several other charities in the area that provide food and other necessities to the homeless. Pam has pledged to donate $10\%$ of the net profits from her new construction business to charity. Leon knows that a $$6,000,000$ construction project like the one being proposed by Tatum Manufacturing could be life$-$changing for Pam's new company, her family, and countless individuals impacted by the charitable organizations Pam is involved with. Leon could easily $($and discreetly$)$ increase the estimated future annual net cash flows for Tatum Manufacturing by a small amount $($approximately $$10,000$ per year$),$ thereby changing the results of the calculations supporting a different recommendation to Tatum Manufacturing's board of directors. Explain why Leon should or should not consider doing this. Your explanation should be at least one paragraph long $($tvped$,$ doublespaced, preferably in a Word document$)$ and should include adequate reasoning supporting vour

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