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An investment of $80,000 today is expected to give rise to an annual contribution of $45,000. This is based on selling one product, a volume of 15,000 units, selling price of $16.50 and variable
cost of $12. Annual fixed cost of $11,000 will be incurred for the next four years; the discount
rate is 10%.
Required:
(a) Calculate the
(b) Calculate the sensitivity of your calculation to the discount rate.
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- A particular service can be purchased for $100 per unit. The same service can be provided by equipment that costs $400,000 today and has a salvage value of $250,000 after 10 years. Annual operating expenses will be $500 per year plus $2.00 per unit.a) If the estimates are correct, what will be the internal rate of return on the incremental investment if 400 units/year are produced.b) If the Attractive Minimum Rate of Return is 15% per year, what is the best alternative?In the case of investment opportunities, the initial investment is estimated at $150,000 the project life is 5 years and the annual costs are $72,600 and the prices and sales volume are as in the following table: Find the sensitivity analysis for the simple rate of return in the case of a 5% decrease in revenues.Assuming monetary benefits of a construction project at $50,000 per year, one-time costs (initial investment) of $15,000, recurring costs of $35,000 per year, a discount rate of 10 per cent, and a 4-year time horizon, calculate the net present value (NPV) of an information system's costs and benefits. Calculate the overall return on investment (ROI) of the project. During which year does break-even occur? Use the NPV template provided (modify to suit your answer) and clearly display the NPV, ROI, and year in which payback occurs. Write a paragraph explaining whether you would recommend investing in this project based on your financial analysis. Explain your answer referring to the NPV, ROI and payback for this project. Discount Rate (10%) Year 0 - 1.0000 Year 1 - .9091 Year 2 - .8264 Year 3 - .7513 Year 4 - .6830