1. The market price and operating costs for both trawlers are applicable today. Set up schedules of market price per tonne, operating cost per tonne, and annual catch size to assist in estimating annual cash flows for both options. 2. Prepare the incremental cash flow tables for (a) the choice to Keep Trawler A for another four years before replacing with Trawler B, and (b) the choice to replace Trawler A with Trawler B immediately. Assume these are the base case scenarios for each option. 3. Determine the basic NPV today and IRR for each choice. Discuss which choice is recommended on the basis of each measure. 4. How would your recommendation change when the difference in project lifespans are taken into consideration? 5. For both investment choices, determine the minimum market price of fish, and maximum operating cost per tonne of fish at the end of the first year in order to breakeven. Discuss your results, addressing the implications to your recommendation. 6. The Board would like you to consider the implications of the following risk factors when making the investment recommendation: - The annual catch is subject to various environmental factors. Though currently it is estimated at 5000 tonnes (based on Trawler A), this can vary by + or - 25% by the end of the first year. - The market price of fish is currently $40 per tonne. Demand and supply can vary over time due to various factors. The price of fish can vary by + or - 20% by the end of the first year. - Operating cost per tonne of fish can vary by + or - 30%, largely due to energy/ fuel costs expected to undergo market volatility over the coming year. 7. Without any calculations, the Board would also like you to provide a preliminary discussion on whether Trawler B should be leased or purchased outright. Your discussion should indicate whether an operating or finance lease may (or may not) be beneficial, and if so, how. Consider the implications of the choice to lease on the firm’s capital structure, and how it changes the framework of your investment analysis.