Explain and defend your processes

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Reference no: EM133588260

Question: An amount of $200,000 has been spent on a feasibility study for the new project. • The project is to be partially financed with a loan of $14m to be repaid annually with equal instalments at a rate of 3% pa over 8 years. • Except for initial outlays, assume cash flows occur at the end of each year. The tax rate is 30% and is payable in the year in which profit is earned. • The after-tax required return for the project is 12% pa. Required (a) Calculate the NPV. Is the project acceptable? Why or why not? Explain and defend your processes, answer, and calculations clearly. C) Conduct a sensitivity analysis showing how sensitive the project NPV is to: a. revenue growth of 0% and 10% b. fixed cost p.a. increase by Sim and decrease by Sim c. the required rate of return increase by 2% and decrease by 2%. Run all above sensitivities separately on a stand-alone basis. Explain and defend your processes, answer, and calculations clearly. Show the NPV change compared to the original calculations.

Reference no: EM133588260

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