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Please someone help me with this Fun & Flair Berhad (FFB) is considering a project that requires an initial investment of RM30 000. It is
Please someone help me with this
Fun & Flair Berhad (FFB) is considering a project that requires an initial investment of RM30 000. It is depreciated over four years using straight-line depreciation. The discount rate is 10% and the firm tax bracket rate is 26%. The information below is used as a guideline for FFB in making its decision. Unit Sales Price/Unit Variable Cost/Unit Fixed Cost Upper Bound 7 500 RM30 RM20.50 Base Case 7 000 RM25 RM18.00 Lower Bound 6 500 RM23 RM15.50 RM20 000 RM18 000 RM17 000 0.15 Probability 0.25 0.60 (a) (b) (c) What is the net present value (NPV) for the best (upper bound) case, base case and worst (lower bound) case for the project? (6 marks) What is the expected NPV of this project? (3 marks) Suppose FFB wants to conduct a sensitivity analysis of the possible changes in unit price. What is the NPV if there is an increase of 10% in sales price under each case? (6 marks) What is the NPV under each case if the discount rate increased by 10%? (6 marks) Based on your answers in (c) and (d), which changes in variable has more impact on the shareholders' wealth? Justify. (4 marks) (d) (e)Step by Step Solution
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