Project Overview
SBS Corporation has developed a new industrial detergent for motor vehicle garages. To commence production, the project requires an initial equipment investment of RM1.2 million and net operating working capital equal to 10% of the 1st-year sales amount, with subsequent years requiring 15% of the next year’s sales. The project is planned for a 5-year life cycle with operational continuity throughout.
Key Financial Details:
- Sales Projections:
- 150,000 units annually at RM10/unit in Year 1.
- Annual sales price increases by 2% after Year 1.
- Cost Structure:
- Variable Cost: RM4.50/unit, increasing by 5% annually.
- Fixed Costs: RM320,000 in Year 1, increasing by 3% annually.
- Depreciation:
- Equipment depreciated using the straight-line method over 5 years.
- Salvage value: RM120,000; estimated scrap value: RM80,000.
- Tax and Discount Rates:
- Corporate Tax Rate: 25%.
- Weighted Average Cost of Capital (WACC): 13%.
Tasks for Analysis:
1. Spreadsheet Model Development:
- Create a model to compute the project’s Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period.
Stuck in This Assignment? Deadlines Are Near?
2. Sensitivity Analysis:
- Examine NPV sensitivity to the following variables at ±10% of base values:
- Sales price
- Number of units sold
- Variable cost per unit
- Fixed costs
- Cost of capital
- Include a graph to visualize the results.
3. Scenario Analysis:
- Best-Case Scenario:
- No increase in sales price.
- 5% increase in units sold.
- 3% decrease in variable cost per unit.
- Worst-Case Scenario:
- 2% decrease in sales price.
- 5% decrease in units sold.
- 3% increase in variable cost per unit.
- Probabilities:
- Best case: 30%
- Worst case: 20%
- Base case: 50%
- Determine:
- Expected NPV
- Standard deviation of NPV
- Coefficient of variation (NPV).
4. Final Recommendation:
- Provide insights on project feasibility based on analysis results.
- Offer specific advice for SBS Corporation to mitigate risks and maximize profitability.
Get 30% Discount on This Assignment Answer Today!
Get Help By Expert
Struggling with assignments in Malaysia? Our Assignment Writing Service Malaysia is here to provide professional, tailor-made academic solutions! Whether it's essays, research papers, or case studies, we deliver high-quality, plagiarism-free work crafted by experienced writers. With a focus on Malaysian university standards and timely delivery, we ensure your assignments meet every requirement. From topic selection to final proofreading, our service guarantees excellence and academic success. Affordable pricing and 24/7 support make us the preferred choice for students across Malaysia. Don’t let deadlines stress you out—let us help you achieve top grades effortlessly! Contact us today for expert assistance!
