please assist with answering question 2.4

SECTION 2-Study Unit 2 - Forecasting in the marketing environment [30] Bold Brands Limited (BBL) is a marketing agency that provides brand communication services to organisations in the retail sector. Market research has indicated a demand for digital communication services of R600 million, increasing by at least 20% per year. BBL is considering launching digital marketing communication services on 1 January 2021. The company's strategic forecasting horizon is three years. You have been asked to assist with cash-flow forecasting for BBL to introduce the new service The following information is available: The company's existing services have created high brand equity through client loyalty, and sales have grown steadily over the past years. With the introduction of digital services. BBL becomes a full-service agency The synergistic value created by the new division is expected to result in a once-off increase in traditional sales of 40 units - over and above the normal 12% growth rate of advertising sales. Thereafter all BBL sales volumes are expected to grow at a rate of 10% per year. (Note: This increase for 2021 must be based on 2020 sales, excluding the additional 40 units) BBL expects to complete 60 digital projects in 2021, increasing by 18% every year thereafter. The average fee for a digital project is estimated to be R250 000 Traditional projects are achieving average revenue of R1,6 million per project. BBL's historical revenue is as follows: Traditional projects 2020 2019 2018 Sales 225 projects 200 projects 170 projects The contribution margin ratio for traditional projects in 2020 was 20%. Digital projects are expected to achieve a contribution margin ratio of 40% in 2021. The marketing budget for both services (in total) is R22 million in 2021. Of this, 15% is to be allocated to marketing the new digital products, BBL's direct variable costs consist primarily of staff costs. Staff salaries are expected to increase by 8% per year. Digital marketing staff are to be hired in 2021 at the start of the new venture. Because their initial salaries are much higher than those offered by the market, their salaries are expected to increase by only 7% per year. Graduate Seness Assignment On Semester 2021 FM Page 6 of 9 Project fees and all expenses other than staff costs are budgeted to increase annually by the inflation rate of 4%. During 2020 R6 million was spent on the establishment of the new service. These expenses will be capitalised over three years and are tax deductible The company's WACC is 14%. The corporate tax rate is 28% 21 Forecast the demand number of projects for each of the year (2021 2022 and 20231 or BBL traditional services (1) 622 uure you see from Question 22 forecast the total contribution for the company (her marketing expenses have been taken into account for the next three years (2021 2022 and 2023) A suggested format is provided below (7) 2022 2023 Traditional projects Average fee per project) Variable cost per project Contribution per project) Number of projects sold Total contribution before marketing expenses) Digital projects Average fee per project Variable cost per project) Contribution per project Number of projects sold Total contribution before marketing expenses) Total contribution for the company Marketing expenses Total contribution 23 Calculate and explain whether the NPV of the forecasted addition cibution made by digital services only. Calculated Question 23. acceptable Remember to include marketing expenses and establishment costs Comment on your findings and recommend to fit whether to continue with the establishment of the new service (5) 2021 2022 2023 Show an NPV schedule and all working A suggested format is provided below NP for services Up front (time) Contribution before marketing expenses Marketing expenses Initial R&D cost Profit before tax Taxshield (from R&D amortisation Profit (for tax calculation only! Tax Net cash flow 24 BBL concerned about the digital sendes division's direct vanatie cost Expert employees are difficult to source, and the company worried that the hudgeted annually increase of I will be insufficient Calculate the sensitivity of this direct variable contrative to the NPV and explain your 25 tist and explain two (2) examples of external armastat variables that may negatively influence BB's forecast (2) 26 BBL'S forced net cash fows for the digital services may vary by 25% wither way 21 Perfomana AL month