1. Explain using examples how the avoidance of cognitive dissonance can affect the investors decision making process. (5 Marks)
2. Karatazi Ltd, which has a cost of capital of 12 per cent, is considering the investment of Kshs. 7m in an improved moulding machine project with a life span of four years.

The garden ornaments produced will retail at Kshs. 9.20 each and cost Kshs. 6 each to make. It is expected that 800,000 ornaments will be sold each year.

Required:

Using sensitivity analysis determine the key variables to this investment for the project?

(10 Marks)