Question: Consider a four-year project with the following information: Initial fixed asset investment Rs.490,000; Straigth line depreciation to zero over the four-year life; zero salvage value;

Consider a four-year project with the following information:

  • Initial fixed asset investment Rs.490,000;
  • Straigth line depreciation to zero over the four-year life; zero salvage value;
  • Selling price Rs. 32; variable costs Rs.19;
  • fixed costs Rs. 210,000; quantity sold 110,000 units; tax rate 34 percent.
  • Required:
  • How sensitive is NPV to changes in quantity sold +10, -10%?

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