QUESTION 2 [5 marks] New Day Berhad management team is evaluating a project to manufacture a new electronic device. The project requires an initial investment of RM800,000.00 to build a new plant. This investment is expected to have a four-year life and to be depreciated using a straight-line method to zero salvage value. The expected sales will be RM5,000,000.00 annually and other financial variables for the project are as per table below: Variables Annual sales (units) Lower Bound 90,000 Unit price (RM) 45.00 Unit variable cost 23.75 (RM) Annual fixed cost 475,000.00 (RM) Base 100,000 50.00 25.00 500,000.00 Upper Bound 110,000 55.00 26.25 525,000.00 Currently the company is paying 28 percent corporate tax and the required rate of return is 10 percent. REQUIRED: i. Calculate the net present value (NPV) for the base, best case and worst case. [9 marks] ii. Evaluate the sensitivity of the NPV for the base case to changes in variable cost. [4 marks] iii. Calculate the financial break-even for this projection. [4 marks] iv. Determine the degree of operating leverage (DOL) at accounting break-even and identify the new OCF if unit sales increase by 15 percent. [3 marks] END OF QUESTIONS