We know from the accounting assignment that Ipana Ltd's management plans to expand the product range. The intention would be to take the hipsters by storm by launching "Napero IPA" whose production process includes a week of fermentation in a pressurized vessel that mimics subsea conditions. After fermentation and filtration, the product is further matured in an untreated French oak cask to which a handful of junipers and a pinch of sea salt are added.

To start production, an investment of 300000 euros in production equipment is required. Based on market research, Ipana Ltd's management expects first year sales to amount to 296800 liters, after which demand is expected to grow at an annual rate of 4.3%. The average sales price is expected to be significantly higher than Ipana IPA, i.e.. around 3.74 / liter. However, the production process requires more expensive raw materials, which are expected to cost 2.12 / liter of Napero IPA produced. Other operating expenses related to the new production process are expected to amount to 260000 / year.

At the time of the investment decision, Ipana Ltd has a weighted average cost of capital of 9.5%. Prices do not include VAT, and the corporate tax is 20%. You do not need to take into account the investments impact on working capital. The production equipment is expected to have a service life of approximately five years, during which it is depreciated through straight-line depreciation, after which it can be assumed to have no residual value. Analyze the profitability of the investment over a five-year period (where the investment is made in year 0 and production takes place during years 15).

1) Calculate the net present value for continued production.

2) Calculate the net present value of shutting down production and selling the production equipment.

3) Calculate the net present value for continued production

4) Calculate the minimum quantity for which production is profitable.