14.15 Advanced. The following data relate to both questions (a) and (b) A company is considering investing in a manufacturing project that would have a three-year life span. The investment would involve an immediate cash outflow of 50 000 and have a zero residual value. In each of the three years, 4000 units would be produced and sold. The contribution per unit, based on current prices, is 5. The company has an annual cost of capital of 8 per cent. It is expected that the inflation rate will be 3 per cent in each of the next three years. (a) The net present value of the project (to the nearest 500) is a $4500 b 5000 c 5500 d 6000 e 6500 (3 marks) (b) If the annual inflation rate is now projected to be 4 per cent, the maximum monetary cost of capital for this project to remain viable, is (to the nearest 0.5 per cent) a 13.0% b 13.5% C 14.0% d 14.5% e 15.0% (2 marks) CIMA Management Accounting - Decision Making