A project with a five year life requires an initial investment of \($120\) 000 and generates a net present value (NPV) of \($50\) 000 at a discount rate of 10% per annum.

The protect cash flows are as follows.

The costs and activity levels are expected to remain the same for each year of the project.
Ignore taxation and inflation.
The sensitivity of the investment decision to changes in the variable costs is:
(A) 131.9%
(B) 44.0%
(C) 33.0%
(D) 29.3%

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Variable material cost Variable labour cost Incremental fixed cost $000 per annum 30 10 5