Your report should not only calculate clearly, but discuss the implications and explain to management the best course of action.
Chaste Chocs
Chaste Chocs is a small chocolate manufacturing business (a “chocolatier”) which is considering a very significant advertising campaign to achieve a major shift in its level of sales.
The campaign will cost £5,000,000 and chocolate advertising experts, who have already been paid £23,000 for their advice, estimate additional unit sales to be as follows:

Year 1 2,000,000
Year 2 1,000,000
Year 3 750,000
Year 4 500,000

The chocolate sells for £2.75 per bar and each bar has a variable cost of £1.05. Additionally, extra staff will be required when extra demand is more than 600,000 bars per year -four extra people will be required in year 1, two people in year 2 and just one in year 3. Each extra member of staff will be paid £17,500 per annum.
You are advised that you should use a cost of capital of 19% when assessing this scheme.
Your brief report should include:
- An executive summary
- A brief introduction
- An explanation of the NPV and payback calculations and results along with appropriate table(s).
- A sensitivity analysis of additional sales being 10% lower throughout the forecast period. What sales rise forecast error % would be necessary to change the viability of the project, using the NPV calculation?
- A summary including a recommendation that draws on both qualitative as well as quantitative factors.