Describe and explain the meaning of each of the following project type and illustrate your explanation with examples. (5 marks) Brown Field Green Field Related Diversification-Backward Integration Forward Integration Expansion Replacement 2. Oman Company is considering the investment on a project with initial investment of OMR 5,000,000. The project has a life of 4 years. Information relating to the future cash flows of this project are as follows: Selling price per Variable cost per Fixed cost Year Sales volume (units) unit unit ! 15.000 450 260 750,000 2 15.000 475 280 750,000 3 10.000 SOO 295 750,000 4 10.000 570 320 750,000 Oman company has a nominal cost of capital of 13%. Required: 1. Measure the sensitivity of the project to changes in variables and give your recommendations. (5 marks) 2. Explain the difference between risk and uncertainty in the context of investment appraisal. (2 marks) 3. Spotty Ltd plans to purchase a machine costing OMR 18,000 to save labour costs. Labour savings would be OMR 10,000 in the first year and in the second year will increase by 10%. The estimated average annual rate of inflation is 9% and the company's cost of capital is estimated at 11%. The machine has a two-year life with an estimated actual salvage value of OMR 5,000 at the end of year 2. Using the discounting money cash flows (nominal method), what is the NPV of the project. (3 marks) Describe and explain the meaning of each of the following project type and illustrate your explanation with examples. (5 marks) Brown Field Green Field Related Diversification-Backward Integration Forward Integration Expansion Replacement 2. Oman Company is considering the investment on a project with initial investment of OMR 5,000,000. The project has a life of 4 years. Information relating to the future cash flows of this project are as follows: Selling price per Variable cost per Fixed cost Year Sales volume (units) unit unit ! 15.000 450 260 750,000 2 15.000 475 280 750,000 3 10.000 SOO 295 750,000 4 10.000 570 320 750,000 Oman company has a nominal cost of capital of 13%. Required: 1. Measure the sensitivity of the project to changes in variables and give your recommendations. (5 marks) 2. Explain the difference between risk and uncertainty in the context of investment appraisal. (2 marks) 3. Spotty Ltd plans to purchase a machine costing OMR 18,000 to save labour costs. Labour savings would be OMR 10,000 in the first year and in the second year will increase by 10%. The estimated average annual rate of inflation is 9% and the company's cost of capital is estimated at 11%. The machine has a two-year life with an estimated actual salvage value of OMR 5,000 at the end of year 2. Using the discounting money cash flows (nominal method), what is the NPV of the project
