A capital investment project has the following estimated cash flows and present values: Required: (i) Calculate the

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A capital investment project has the following estimated cash flows and present values:

Required:(i) Calculate the sensitivity of the investment decision to a change in the annual fixed costs.(ii) State TWO benefits to a company of using sensitivity analysis in investment appraisal.

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Management and Cost Accounting

ISBN: 978-1473748873

10th edition

Authors: Colin Drury

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Question Posted: Feb 10, 2020 08:13 AM

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A capital investment project has the following estimated cash flows and present values: Required: (i) Calculate the

Question:

Cash flow Discount factor Present value @ 12% Year Initial investment (100 000) 1.0 (100000) 1-5 Contribution 52000 3.605 187 460 per annum 1-5 Fixed costs (25000) 3.605 (90125) per annum 20000 0.567 11340 Residual value

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Management and Cost Accounting

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