Sensitivity Analysis

A Company has the following income Statement for year ended December 31,2019

Sales Rs 6M

CGS 4.5M

Gross Profit 1.5

Other Expenses 0.5

Net Profit 1.0

Taxes 0.2

Profit After tax 0.8

The company has applied for a Bank loan with an annual installment of Rs 6M for it factory expansion

This expansion could increase sales capacity over the years by 10% p.a. Due to tough competition in the market price increases may not be possible. CGS may rise by 7% per year. In your computation ignore taxation.

Bank is making a Sensitivity analysis

Required

1. In case the assumptions hold true should the bank advance loan
2. Bank own expectation is that sales would increase by 15% p.a. Should loan be given
3. In case the CGS does not increase by more than 5% p.a should loan be given
4. Provide table of your computation in all 3 cases