An investment of $40,000 today is expected to give rise to an annual contribution of $25,000. This is based on selling one product, a volume of 10,000 units, selling price of $12.50 and variable cost of $10. The annual fixed cost of $10,000 will be incurred for the next four years; the discount rate is 10%. Required:

(a) Calculate the NPV of this investment.

(b) Calculate the sensitivity of your calculation to the following:

i. Initial investment

ii. Selling price per unit

iii. Variable cost per unit

iv. Sales volume

v. Fixed costs

vi. Discount rate