Assignment Requirements

a) Prepare a 5-to-8-page report (excluding the assignment cover, the assignment question,

tables and the reference page).

Type your response/findings/ answers using Microsoft Word. Answers with verbatim

quotations from references will not be accepted.

b) You can use Excel for your workings (calculation parts) but you need to copy and paste it

initially in Microsoft Word. All assignments will need to be converted to PDF before

submission. Please also file your excel spreadsheets.

c) Any font type will do but make sure that the font size is 12 with 1.5 spacing.

d) The cover page should include the assignment title, course code, course name, your

name, and matric number

e) Reference/s should be clearly spelt out (on ONE separate page at the end of your

answer)./nAssignment Question

JD Sdn Bhd has developed a new industrial detergent that can be used in motor vehicle garages.

It would cost RM

1,000,000.00 to buy the equipment necessary to manufacture

the blenders, and initially, it would require net operating working capital equal to

of the 1st year sales amount. Net operating working capital will remain at the same rate. The

project would have a life of

years. If the project is undertaken,

years.

it must be continued for the entire

The variable cost is

5.00

and will increase at an inflation rate of

5

5

The firm believes it could sell

The detergents would sell for RM

After the first year, JD wants to increase the sales price by

The company's fixed cost would be at RM

and would also increase by

100,000 units per year

12.00 per unit

12%

3% annualy.

420,000.00 at year 1

3% annually.

per unit

3% annually.

The equipment would be depreciated over a

5.00

year period, using the straight

line method. The annual depreciation will be calculated on a salvage value of the equipment

at the end of the project's life of RM

200,000.00

The company, however, estimateed the machine can be sold as scrap for RM

The corporate tax rate is

25%

The cost of capital is

15%

250,000.00/na)

Develop a spreadsheet model and use it to find the projects NPV, IRR, and payback.

Conduct a scenario analysis to determine the sensititity of NPV to changes in/nc)

sales price

number of units sold

variable cost per unit

fixed cost

cost of captital.

Set these variables at

10%

above and

their base-case scenario, please include a grahph in your analysis.

Conduct a scenario analysis. Assume that the best case condition is with no increase in

the sales price,

0%

increase in number of unit sold of

decrease in the variable cost/unit

all other variables remain the same.

For the worst case condition ther will be

a decrease in units sold

a decrease in unit price

an increase in variable cost/unit

5%

-3%

Best Case

Worst Case

Base Case

-5%

-2%

3%

The best case, worst case and base case conditions are assumed to have an

propability of

10% below

33.33%

33.33%

33.34%

Determine

the standard deviation of the NPV and the project coefficient of variation NPV./nd)

On the basis of your analysis, would you recommend that the project be accepted?

What added advise and special attention would you give to the company with regard

to the project?