A capital investment project has the following estimated cash flows and present values: Required: (i) Calculate the

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A capital investment project has the following estimated cash flows and present values:

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Required:
(i) Calculate the sensitivity of the investment decision to a change in the annual fixed costs.
(3 marks)
(ii) State TWO benefits to a company of using sensitivity analysis in investment appraisal.
(2 marks)
CIMA P1 Performance Operations

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Management And Cost Accounting

ISBN: 9781408093931

9th Edition

Authors: Colin Drury

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Question Posted: Jun 05, 2024 01:02 AM

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A capital investment project has the following estimated cash flows and present values: Required: (i) Calculate the

Question:

Cash flow Discount factor Present value Year @ 12% $ 0 Initial investment (100000) 1.0 (100000) 1-5 Contribution per annum 52000 3.605 187460 1-5 Fixed costs per annum (25000) 3.605 (90125) 5 Residual value 20000 0.567 11340

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Management And Cost Accounting

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