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You are the CFO of a manufacturing company operating in the chemical industry. Due to the increasing volatility in your sector in recent years, company
You are the CFO of a manufacturing company operating in the chemical industry.
Due to the increasing volatility in your sector in recent years, company owners want to reduce the volatility in revenues and increase profitability by investing in another sector.
The planned investment is $ WACC and economic lifespan of the investment is years other data of the proposal are given in the following figure.
tableVariablesWorst case,tableBase expectedcaseBest caseMarket size,Market share,Unit price,,,tablevariable cost perunitFix cost per unit,
You have been given the task of determining a manufacturing industry to invest in and carrying out the necessary feasibility studies. After giving a brief description of the industry and location, you must apply NPV IRR and payback period methods to state your opinion on investment using the data above. Remember that scenario analysis is constructed based on key variables like market share, market size, unit price variable, and fixed cost the range of values have been ordered according to the tree main scenarios as worst case, base expected and best case. Your decision basically depends on the base case result. But you shouldn't ignore other options either.
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