Lakewood Ltd. has been offered an eight year contract to provide maintenance for various condominium corporations. To accept the contract the company would have to purchase several pieces of equipment...

Lakewood Ltd. has been offered an eight year contract to provide maintenance forvarious condominium corporations. To accept the contract the company wouldhave to purchase several pieces of equipment at a total cost of $320,000. Lakewood must provide the seller of the equipment a 40% deposit of the total cost immediately.The remaining amount owing on the equipment will be repaid in 3 equal annual payments commencing at the end of year 1.The salvage value of this equipment at the end of the contract is $30,000.If the contract is accepted, several old fully depreciated, for accounting and tax, pieces of equipment will be sold for $20,000.To store some of the new equipment, Lakewood will have to lease some spacefor the eight year period that will cost $5,000 per year. The eight lease payment aredue at the beginning of each year.The contract allows Lakewood to charge an hourly rate of $60 for its maintenanceservices. Expected chargeable hours for the next eight years are as follows:Chargeable hours per yearYears 1 to 420,000Year 5 to 815,000Variable costs are expected to be $40 per hour with fixed annualcosts of $260,000.Lakewood’s required rate of return is 10% after tax and its tax rate is 30%.The equipment will qualify for a capital cost allowance rate of 20% The tax shield formula is as follows:(C dT)*(1+.5r)-(SdT)*1(d + r)(1+r)(d+r)(1+r)nREQUIRED1. (18 marks) Compute the NPV of this contract. Should they enter into this contract?2.(1 marks) Is the IRR greater than 10%?Briefly explain.3.(2 marks) What qualitative factors should Lakewood Ltd. consider when making this decision to accept the six year contract? Briefly provide 2 factors in point form.4.( 3 marks) If the annual chargeable hours are 10% lower than expected, what would the NVP now be? Would this decline affect Lakewood's decision to enter into thiscontract? Please support with computations