Ques .1 For a project being considered for SK Electronics evaluate whether it should be undertaken using NPV method.Ques.2 Create Scenario analysis and discuss success of the project with computation and analysis ofExpected NPV, Standard Deviation and Coefficient of variation .

All amounts in Rs'000

Investment 50,000

Sales Volume in units 2,000

Price 20

Variable cost 8

Fixed Cost 5,000

Depreciation WDV (on investments) 25%

Income Tax 30%

Discount Rate for NPV 11%

Cashflows

Year 0 1 2 3 4 5 6 7

Sales 40,000 40,000 40,000 40,000 40,000.00 40,000 40,000

Variable Cost 16,000 16,000 16,000 16,000 6,000 16,000 16,000

Fixed Cost 5,000 5,000 5,000 5,000 5,000 5,000 5,000

EBDIT 19,000 19,000 19,000 19,000 9,000 19,000 19,000

Investment Value 50,000 37,500 28,125 21,093 15,820.31 11,865.23 8,898.93 0

Depreciation 12,500 9,375.00 7,031.25 5,273.44 3,955.08 2,966.31 8,898.93

EBIT 6,500.00 9,625.00 11,968.75 13,726.56 15,044.92 16,033.69 10,101.07

Tax 1,950.00 2,887.50 3,590.63 4,117.97 4,513.48 4,810.11 3,030.32

PAT 4,550.00 6,737.50 8,378.13 9,608.59 10,531.45 11,223.58 7,070.75

Cashflows -50,000.00 17,050 16,112.50 15,409.38 14,882.03 14,486.52 14,189.89 15,969.68

For Scenario analysis

Key Variables Pessimistic Optimistic Expected

Sales Volume in units 1,000.00 3,000.00 2,000.00

Price 15.00 25.00 20.00

Variable cost 10.00 7.00 8.00

Fixed Cost 6,000.00 4,000.00 5,000.00

Probability 0.25 0.25 0.50