Hi there,

Please answer all the questions; please don't skip any subparts. May you explain all the formulas needed and the theories behind them first. Feel free to make any reference links that may potentially help me to study. If you don't know any part or subpart, may you not take the question. Please provide an excellent formatted answer, and I strongly prefer typing rather than handwritten. If you provide a bad answer in any form that is badly formatted, or wrong, etc., I am afraid I will need to downvote you and possibly flag it. The answer needs to be. very logical, easy to understand , clear and cover all the necessary theories. I believe you are able to do a good job.Thank you.

BEN Electronics is considering buying a new machine and using it to produce a new type of silicon chip that the company's engineers have designed. The financial estimates supplied by the firm's technical and marketing staff are as follows. One number is given for figures that are certain. Where there is risk, the analysts have been asked for an expected value and a feasible range of values. The probability that the final outcome will be below the lower limit, or that it will be above the higher limit is 5%. The new machine will cost 600,000 (certain), and it has a design capacity of one million chips a year. The proportion of these chips that will be of saleable quality is estimated at 80% (range 68% to 92%). The fixed costs of operation will be 100,000 per year (certain) and the variable costs per unit sold will be 10p per chip (certain). Initially chips will be sold at what the market will bear. This is expected to be 50p (range 45p to 55p). However, competitors will have learned how to make the chips at the end of the 4th year (range 3 yrs to 5 yrs) and when this happens the price will fall to 30p. BEN's cost of capital for this project is 15% p.a. The machine, and the chips it produces, will become obsolete after 8 years of production. (i) (ii) Calculate the expected value for the NPV. Perform a sensitivity analysis on this project. Which type of risk (% of saleable chips, number of years before competitive entry and initial price) has the biggest influence on the net present value of the project? How might the business use this information? (iii) NB The variable costs are only incurred on chips that are of saleable quality