TOPIC 3rd (3.5 Points) Hraxin Co is evaluating a four-year investment project. The initial investment, payable at the beginning of the first year of operation, is 5 million euros. The residual value of the project at the end of the fourth year is 500,000. There issome uncertainty about the selling price of the products produced, which depends on the future state of the economy. The financial department of the company prepared the following scenarios for the price of products, depending on the expected state of the economy: Expected economic growth Weak Moderate Strong Probability 35% 50% 15% Sale price at present values 25 per product 30 per product 35 per product

The above selling prices are subject to annual inflation of 4% per year, regardless of the future financial situation. The forecasts regarding the number of products that will be sold, as well as total nominal variable costs are:

Year 1 2 3 4 Sales (number of products) 150,000 250,000 400,000 300,000 Nominal variable cost ( 000) 2,385 4,200 7,080 5,730

The annual overhead as a result of the investment is 400,000 per year at current prices. A large part of these overheads is related to energy costs, which are expected to increase sharply in the future due to lack of energy supply, so inflation of 10% per year is expected. The company uses the fixed depreciation method for the project. The tax rate is 30% and the discount rate used by the company for similar risk investments is 11% per annum after taxes. Wanted: 1. Calculate the expected net present value of the investment project and evaluate the project. (2 points) 2. Sensitivity analysis will help Hraxin Co in assessing its risk investment plan and how? (1.5 points)