Company X is evaluating the purchase of a new machine and has the following information: Initial investment: 320 000

Residual value: nil

Expected life: 12 years

Sales volume: 20 000 units per year Sales price: 7.50 per unit

Variable cost: 2.50 per unit

Fixed costs: 20 000 per year

Cost of capital: 12%

1. Calculate the payback period, NPV of the project. How would you calculate IRR of the project?
2. Assess the sensitivity of the NPV to the change in sales price.