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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 : units,year : units: year : units.
Bwato PLc intends to use a flexible manufacturing system which will be able to produce up to units per year. The equipment will cost kpayable year and will have an estimated residual value of kreceivable at the end of year
A advertsing campain will be implemented by Bwaato PLc on the folloing basis year :Ki;Year : K
Bwato PLc has estimated its sales Q in units and selling price per unit P for each year over the life of the product.This may be expressed in terms of the pricedemand function pQ
The year one market share is very crucial. Annual sales units for Bwato PLc for year and are expected to increase or decrease from the year 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 year and will be set in acciordance with the pricedemand function estimate detailed above.
Variable cost is estimated at K per production unit.
Fixed costs directly attributable to the productother than advertising are estimated at K per year for each of the years to
Bwato PLc has an estimated cost of capital of 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 K per unit is used. Show all your workings.
B Briefly discuss three non financial considerations in long term decision making
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