. Test Your Knowledge.1 831 Limited M) is considering to set-up a plant for the production of a single product en The initial capital investment required to set up the plant is $ 15 million. The elected life of the plant is only 3 years with a residual value of 20% of the initial capital ment. The plant will have an annual production capacity of 1 million tons. A local group has offered to purchase all the production for $8 per ton in year 1 and thereafter at aprice to be increased 5% annually. Other relevant information is as under: In year I, operating costs (other than wages and depreciation) per annum would be S2 per ton. They are expected to increase in line with Producer Price Index (PPY of 10.34%. Annual wages would Simillion and are linked to Consumer Price Index (CPI) of 11.73% 1. WM's cost of capital for this project, in nominal terms is 18%. The tax rate applicable to the company IN 30 and the tas is parible in the same the company can claim normal tax depreciation at 20% per annum under the reducing al Advise whether WM should invest in the project b) Perform a sensitivity analysis of the project with respect to be Poland method. required (13 marks) 1 of i Cost of Capital 13 marks) erta il Selling Price 13 marks] Sales Volume [3 marksi Operating Expenses 13 marks) leido it Invest product Legal matters, Consumer preferences, projects' critical utility in the production of a main investors and customers image, risk involved in the project to be undertaken Test Your Knowledge 1 231 Limited (WM) is considering to set-up a plant for the production of a single product BET3 The initial capital investment required to set up the plant is $ 15 million. The expected life of the plant is only 5 years with a residual value of 20% of the initial capital investment. The plant will have an annual production capacity of 1 million tons. A local group has offered to purchase all the production for $8 per ton in year 1 and thereafter at a price to be increased 5% annually. Other relevant information is as under: 1 In year 1, operating costs (other than wages and depreciation) per annum would be 52 per ton. They are expected to increase in line with Producer Price Index (PPI) of 10.34%. Annual wages would $1million and are linked to Consumer Price Index (CPI) of 11.73%. WM's cost of capital for this project, in nominal terms is 18%. The company can claim normal tax depreciation at 20% per annum under the reducing al Advise whether WM should invest in the project. The lux rate applicable to the company is 30% and the wax is povable in the same holanice method. Required (13 marks] b) Perform a sensitivity analysis of the project with respect to: Cost of Capital i. [3 marks) 11. Selling Price 13 marks) H. Sales Volume [3 marks) lv. Operating Expenses 13 marks) fenrenaring to launch a new nonduct in a new market which is outside its . Test Your Knowledge.1 831 Limited M) is considering to set-up a plant for the production of a single product en The initial capital investment required to set up the plant is $ 15 million. The elected life of the plant is only 3 years with a residual value of 20% of the initial capital ment. The plant will have an annual production capacity of 1 million tons. A local group has offered to purchase all the production for $8 per ton in year 1 and thereafter at aprice to be increased 5% annually. Other relevant information is as under: In year I, operating costs (other than wages and depreciation) per annum would be S2 per ton. They are expected to increase in line with Producer Price Index (PPY of 10.34%. Annual wages would Simillion and are linked to Consumer Price Index (CPI) of 11.73% 1. WM's cost of capital for this project, in nominal terms is 18%. The tax rate applicable to the company IN 30 and the tas is parible in the same the company can claim normal tax depreciation at 20% per annum under the reducing al Advise whether WM should invest in the project b) Perform a sensitivity analysis of the project with respect to be Poland method. required (13 marks) 1 of i Cost of Capital 13 marks) erta il Selling Price 13 marks] Sales Volume [3 marksi Operating Expenses 13 marks) leido it Invest product Legal matters, Consumer preferences, projects' critical utility in the production of a main investors and customers image, risk involved in the project to be undertaken Test Your Knowledge 1 231 Limited (WM) is considering to set-up a plant for the production of a single product BET3 The initial capital investment required to set up the plant is $ 15 million. The expected life of the plant is only 5 years with a residual value of 20% of the initial capital investment. The plant will have an annual production capacity of 1 million tons. A local group has offered to purchase all the production for $8 per ton in year 1 and thereafter at a price to be increased 5% annually. Other relevant information is as under: 1 In year 1, operating costs (other than wages and depreciation) per annum would be 52 per ton. They are expected to increase in line with Producer Price Index (PPI) of 10.34%. Annual wages would $1million and are linked to Consumer Price Index (CPI) of 11.73%. WM's cost of capital for this project, in nominal terms is 18%. The company can claim normal tax depreciation at 20% per annum under the reducing al Advise whether WM should invest in the project. The lux rate applicable to the company is 30% and the wax is povable in the same holanice method. Required (13 marks] b) Perform a sensitivity analysis of the project with respect to: Cost of Capital i. [3 marks) 11. Selling Price 13 marks) H. Sales Volume [3 marks) lv. Operating Expenses 13 marks) fenrenaring to launch a new nonduct in a new market which is outside its