Question 2 You are the financial analyst for Nasier Group plc, a global manufacturing company. The company is considering the development of a new slurry pump to add to its existing products. The pump is expected to improve the market share of the company if it is fully integrated into its existing product line. With the quick pace of advancement in technology, you expect the slurry pump to be obsolete by the end of five years. The equipment required for the project has no salvage value. The required return for projects of this type is 18%, and the company has a 25% tax rate. Assume 20% reducing balance depreciation. i) Discuss how sensitivity analysis and scenario analysis are adopted in project appraisal and the main difference between these two approaches. (15 marks) ii) Using the information provided in the table below, calculate the Net Present Value (NPV) of this project under the Pessimistic, Expected and Optimistic outcomes. Explain whether or not you would recommend the project? Market size Market share Selling price Variable costs per unit (percentage of selling price) Fixed costs per year Initial investment Pessimistic 1,000 15% 10,000 72% Expected 1,500 20% 15,000 70% Optimistic 1,700 25% 20,000 68% 400,000 2,500,000 450,000 2,500,000 550,000 2,500,000 (35 marks)