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can somebody please tell me the variable cost per unit with a 3% inflation per year adjustment? r of operation. The following information relates to
can somebody please tell me the variable cost per unit with a 3% inflation per year adjustment?
r of operation. The following information relates to the investment project a planned investment project costing $25m, payable at the start of the irst Year 1 Year 2 624,000 717,000 788,000 Year 3 Year 4 Sales volume (units/year) Selling price (S/unit) Variable costs (S/unit) Fixed costs (S/year) 520,000 3000 10-00 30-00 10-93 700,000 735,000 779,000 841,000 30-00 10-20 30.00 10-61 This information needs adjusting to take account of selling price inflation of 4% per year and variable cost inflation of 3% per year. The fixed costs, which are incremental and related to the investment project, are in nominal terms. T year 4 sales volume is expected to continue for the foreseeable future. Pelta Co pays corporation reuucirng uaiance basis. he The company can claim tax-allowable d The views of the directors of Pelta Co are that all investment projects must be evaluated over four years of oper with an assumed terminal value at the end of the fourth year of 5% of the initial investment cost. Both net present value and discounted payback must be used, with a maximum discounted payback period of two years. The real after-tax cost of capital of Peta Co is 7% and its nominal after-tax cost of capital is 12%. Required: (9 marks) (2 marks) (3 marks) (6 marks) (20 marks) (a) Calculate the net present value of the planned investment project. (il) Calculate the discounted payback period of the planned investment project. (b) Discuss the financial acceptability of the investment project. (c) Critically discuss the views of the directors on Pelta Co's investment appraisalStep by Step Solution
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