Question1 ZayithGhanaLtdisintotheproductionofZalu.However,atarecentBoardmeeting,therewasa proposalfortheproductionofZele,anewseven-octavevoiceemulationimplant.Asaresult,Zayith investigatedthemarketingpotentialoftheZele.Zayithsentaquestionnairetoconsumersinthree markets:Accra,Kumasi,andCapeCoast.Theresultsofthethreequestionnairesweremuchbetter thanexpectedandsupportedtheconclusionthattheZelecouldachievea10to15percentshareof themarket.Ofcourse,somepeopleatZayithcomplainedaboutthecostofthetestmarketing, whichwasGH50,000.ZayithGhanaLtdprojectsunitsalesforZeleasfollows: Year UnitSales 1 8,300 2 9,200 3 10,400 4 9,800 5 8,400 However,theintroductionofthisZeleisexpectedtoleadto1,000unitsperannum dropinsales Zalu.ThesellingpriceperunitforZaluisGH100whilethevariablecostisGH70.Thishasnotax implicationsforZele.ProductionofZelewillrequireGH150,000innetworkingcapitaltostartand additionalnetworkingcapitalinvestmentseachyearequalto15percentoftheprojectedsalesfor thatyear.Inthefinalyearoftheproject,networkingcapitalwilldeclinetozeroastheprojectis wounddown.Inotherwords,theinvestmentinworkingcapitalistobecompletelyrecoveredbythe endoftheprojectslife.TotalfixedcostsareGH240,000peryear,variableproductioncostsare GH190perunit,andtheunitsarepricedatGH345each.ItwillcostZayithGH2,000,000to procuretheequipmentneededtoproduceZele.Thisisahigh-techequipmentwhichisnotavailable in the countryand willtherefore have to be imported from USA.Itwillcostthe company GH200,000incustom dutiesandfreightcharges.Again,theinstallationoftheequipmentwillcost ZayithGH100,000.Becausetheimplantsareintendedforprofessionalsingers,thisequipmentis depreciatedusingthestraight-linebasis.Infiveyears,thisequipmentcanbesoldforabout20 percentofitsacquisitioncost.Thecostofacquisition,custom dutiesandfreightcharges,and installationincludinginitialworkingcapitalinvestmentistobefinancedpartlybyaloanfrom Swez Banktothetuneof GH1,000,000ataninterestrateof15%andtheremainingfinancedfrom the internalresourceofthefirm.Mr.Qwesi,theFinanceDirectorhasestimatedthebetaoftheproject tobe2.5andtheaveragereturnforstockstradedontheGhanaStockExchangetobe10%whilethe rateonGovernmentofGhanatradedTreasurybillsis5%. Required: a.EvaluatetheprojectusingtheNPVandrecommendwhetherZayithshouldgoaheadwiththe production Zele. (14marks) b.Discussthree(3)businessfactors(otherthantheformalfinancialinvestmentappraisalalready conducted) that Zayith should consider before deciding whether to proceed. (6marks