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Consider a construction company that is susceptible to risk. There is an initial investment of 9 0 0 0 0 followed by a 4 -
Consider a construction company that is susceptible to risk. There is an initial investment of followed by a year projected cash flow as shown in the table below. There is a possible demand of units of the products per annum till the end of the project. The discount rate is
a Calculate the NPV of this project
b Recalculate the NPV for each of the following changes in parameters
i Sales price: increase and decrease.
ii Labour: increase and decrease.
iii Discount rate: increase and decrease.
iv Materials: increase and decrease.
c From the results in Question b construct a sensitivity graph showing the changes in the NPV with respect to the four parameters.
d For the quantity demanded, when does a breakeven happen and determine the percentage deviation before the breakeven point. All other parameters are constant
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