Bacher Co is considering investing $500,000 in equipment to produce a new type of ball. Sales of the product are expected to continue for three years, at the end of which the equipment will have a scrap value of $80,000. Sales revenue of $600,000 pa will be generated at a variable cost of $350,000. Annual fixed costs will increase by $40,000.

(a) Determine whether, on the basis of the estimates given, the project should be undertaken, assuming that all cash flows occur at annual intervals and that Bacher Co has a cost of capital of 15%.

(b) Find the percentage changes required in the following estimates for the investment decision to change:

(i)initial investment

(ii) scrap value

(iii)selling price

(iv)unit variable cost

(v) annual fixed cost

(vi)sales volume

(vii) cost of capita