The following table presents the projected revenues and costs of a project consisting of rolling out a new product. YEAR 2021 Initial Investment £150,000 Marketing costs 0 Production costs 0 Sales (number of units) Price per unit £220 2022 2023 2024 2025 £0 £O £0 EO £15,000 £7,000 £10,000 £10,000 £20,000 £20,000 £20,000 £25,000 0 100 320 520 830 £220 £200 £180 £150 Assuming return rates on a safe investment are i=5 %, calculate: 1. The Net Present Value of the project (NPV). 2. Estimated payback period. 3. Accounting rate of Return (ARR). 4. Is the project investment worthwhile? Justify you answer. 5. If we assume i=0.8% and the project carries risks represented by the flowing: . Probability of technical success :0.9 . Probability of commercial success :0.8 Re-evaluate the worthwhileness of the project –
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