2. Net Present Value Year Net Cash Flow £ × Discount Rate (10%) = PV £

0 (235,000) 1.000 (235,000)

1–10 40,000 6.145 245,800 10 5,000 0.386 1,930 NPV = 12,730 Evaluate the effect on the project’s base case NPV of each of the following:

(a) ±10% change in income;

(b) ±20% change in operating costs;

(c) ±20% change in the project’s estimated lifespan;

(d) based on your findings, what is your advice to management about the project’s acceptability?