A friend has the idea of setting up a mobile hairdressing business. After a brief discussion, you ascertain the following details that enable you to put together your report. - In the beginning, the business will buy two vans costing £17,500 each (including the hairdressing equipment). - Before the business starts, £4,500 will be spent on advertising. - The plan is to look ahead for four years of operations with the vans sold for an estimated £1,550 each at the end of the fourth year. - Two staff will be employed, each costing a fixed £20,500 per year for each of the four years. - Other fixed costs will be £5,500 per year for the rent of the office base and £3,300 per year for other costs. - Variable costs (petrol and hair products etc) will be £13 per customer. The selling price will be £27.50 - The company will work 50 weeks a year, for 5 days a week. Each van is forecast to have 6 appointments in the first year per day (so, 12 in total for the two vans). In years, 2, 3, and 4, this is expected to rise to 8 appointments per day per van. - The assumed time value of money (discount rate) is 13% Your brief report should include: 

- An executive summary - A brief introduction - An explanation of the NPV and payback calculations and results along with appropriate table(s). - A sensitivity analysis of additional sales being 10% lower throughout the forecast period. What sales rise forecast error % would be necessary to change the viability of the project, using the NPV calculation? - A summary including a recommendation that draws on both qualitative as well as quantitative factors.

Answer rating: 100% (QA)

Answer Explanation The mobile hairdressing business is viable with an NPV of 59846 and a payback per... View the full answer