Hello, i know the question is long but im just practising for my exams next week and was wondering if you could help me out

Winchester plc manufacture washing machines and other similar household products. They are considering producing a new washing machine that they hope will be the most energy efficient on the market. They will need to buy some new machinery at a cost of $1,400,000, it has an expected life of 5 years at the end of which it is expected that it can be sold for f250,000. Expected sales, with selling prices per unit in current terms, for the next 5 years are: Year Expected Sales Units Unit selling price 1,500 E800 2 1,800 E750 2,000 E700 4 1,800 E650 5 1,400 E500 Unit variable costs are estimated to be f400 per unit in current terms and attributable fixed overheads are estimated to be f200,000 per year in current terms. The company believes that both sales and costs will be affected by inflation, with selling prices rising at 5% per year and all costs rising by 4% per year. Winchester plc pays corporation tax on profits at 20% per year one year in arrears and the new machinery will be eligible for capital allowances at 25% per year on a reducing balance basis. The new machine is expected to be purchased on the first day of the new financial year which is about to start. The estimated relevant cost of capital for this project is 12% Required (a) Calculate the net present value of the project to invest in the new machinery (16 Marks) (b) Calculate and briefly explain the sensitivity of the project to a change in sales volume (4 Marks) (c) Critically appraise the answers to parts (a), (b) and (c) and advise Winchester plc as to whether they should go ahead with this project. (20 Marks) TOTAL (40 Marks) Discount factors for 12% Period 2 3 4 5 6 7 8 9 10 Discount 0.893 0.797 0.712 0.636 |0.567 0.507 0.452 0.404 0.361 0.322 Factor