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Bwato PLc is considering entering the market for a single product which as an estimated life cycle of three years.The following information has been provided:

Bwato PLc is considering entering the market for a single product which as an estimated life cycle of three years.The following information has been provided:
The total market size is estimated as follows;year 1: 800,000 units,year 2: 1,200,000 units: year 3: 600,000 units.
Bwato PLc intends to use a flexible manufacturing system which will be able to produce up to 200,000 units per year. The equipment will cost k2,000,000[payable year 0] and will have an estimated residual value of k400,000[receivable at the end of year4]
A advertsing campain will be implemented by Bwaato PLc on the folloing basis year 0:Ki,000,000;Year 2: K800,000.
Bwato PLc has estimated its sales [Q] in '000 units and selling price per unit [P] for each year over the life of the product.This may be expressed in terms of the price/demand function p=70-0.15Q.
The year one market share is very crucial. Annual sales units for Bwato PLc for year 2 and 3 are expected to increase or decrease from the year 1 level aachieved in proportion to the change in the size of the overall market from one year to the next,in so far as the production capacity of Bwato PLc will allow. The prices set by Bwato PLc in each of the year2 and 3 will be set in acciordance with the price/demand function estimate detailed above.
Variable cost is estimated at K25 per production unit.
Fixed costs directly attributable to the product[other than advertising\ are estimated at K600,000 per year for each of the years 1to3
Bwato PLc has an estimated cost of capital of 12% for this type of proposal.
Ignore taxation and inflation.
A. Calculate the Net present Value [NPV] ans Internal Rate of Return [IRR] of the propasal where year one launch price of K60 per unit is used. Show all your workings.
B. Briefly discuss three non financial considerations in long term decision making

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