Green Mountain Ltd is considering introducing a new product with the following possible outcomes: The cost of plant and equipment required is expected to be N$800 000 and residual value of the plant at the end its economic life is expected to be zero, whether economic life is 3, 4 or 5 years. Assume that taxation is not applicable and the company’s WACC is 11o/o.The fixed operating costs do not include depreciation and relate only to cash fixed overheads. Worst case Base case Best case Sellinq price per unit 20 25 30 Sales volume (units) 4 000 000 6 000 000 8 000 000 Variable cost per unit 15 13 11 Fixed operating cost Per vear 3 500 000 3 200 000 3 000 000 Economic life 3 4 5
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