What is the net income level for each of the scenarios

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Question - You have the following information regarding prospective sales for a proposed new project. It is expected that the project has a 5 year life and that the initial cost will amount to R200000. In a market survey it was found that most probable sales are expected to be 6000 units, worst case sales 5500 units and best case sales 6500 units. Depreciation is straight-line to zero. As part of your investigation into financial viability you decide to do a scenario analysis for decision-making purposes. Taxes are charged at a flat rate of 30%. In the table below, you will find some more important information. Required rate of return is 12%.

 

Base case

Worst case

Best case

Sales price/unit

R80

R75

R85

Sale (Units)

6000

5500

6500

Variable cost

R60

55

65

Fixed cost

R50000

R45000

R55000

What is the net income level for each of the scenarios?

What are the net operating cash flows per year for each of the scenarios?

What is the NPV and MIRR for each of the scenarios?

Reference no: EM132550674

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