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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 90000 followed by a 4-year projected cash flow as shown in the table below. There is a possible demand of 100000 units of the products per annum till the end of the project. The discount rate is 12%.
(a) Calculate the NPV of this project
(b) Re-calculate the NPV for each of the following changes in parameters
(i) Sales price: 5% increase and 10% decrease.
(ii) Labour: 9% increase and 15% decrease.
(iii) Discount rate: 10% increase and 10% decrease.
(iv) Materials: 8% increase and 12% decrease.
(c) From the results in Question 5b, construct a sensitivity graph showing the changes in the NPV with respect to the four parameters.
(d) For the quantity demanded, when does a break-even happen and determine the percentage deviation before the break-even point. (All other parameters are constant).
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