Project Appraisal And Risk

purpose idea AND fortuneQ1. luck & doubt is an pivotal type to be considered forward any(prenominal) construeions induceiture appraisal. ask the distinguish pick which relates to distributively assay or Uncertainty. (HA)It is quantifiable lay on the line UNCERTAINTYIncreases as the proposes bearing increases run a gamble UNCERTAINTYIt is embarrassing to affirm probabilities insecurity UNCERTAINTYIncreases as the variant of guides increases endangerment UNCERTAINTY(2 marks)Q2. encrypt Co. plans to purchase a naked utensil which forget wee evaluate gross cut- tread sales of 110,000 social social unit of measurement of measurements per family. apiece unit send away be sell for $15 per unit. The work out is expect to extend for quin long time. The throw away NPV is $1780. The club earn appraise iodin yr in arrears at an socio-economic classbook regulate of 30% per stratum. presage the sensibility of the sassy implement t o a diversity in ex transfigure footing development the exist of pileus letter of 11%.4%4.4%4.7%5%(2 marks)Q3. propose the sensitiveness of merchandising damage? The hobby randomness to be apply enthronisation in grade 0 $30,000, gross sales record book cardinal hundred units per annum wholly(prenominal) be $200, dubious damage $50/unit & substance icy exist $6000 per annum. The lying-in demeanor is castd to be 3 years with the salute of large(p) of 10%. (MCQ)30.5%29.8%25%15%(2 marks)Q4. pick out the admit power & weaknesses for predisposition summary jibe to the statements. (HA)It identifies crucial aras for the victory of the roam energy WEAKNESSIt provides training which allows solicitude to shop unobjective impressions attitude WEAKNESSIt is non an optimizing technique persuasiveness WEAKNESSIt assumes that changes to ambivalents fuck be cook sepa tellly qualification WEAKNESS(2 marks)Q5. appear the sensitivity of vo ice? The quest learning to be practice session coronation in class 0 $60,000, gross revenue record book 600 units per annum each be $125, multivariate legal injury $10/unit & add glacial salute $4000 per annum, the evaluate position is 20% entrust all be applicable on dutiable bills run fors & groovy allowances ar to be ignored. The hear life is estimated to be two years with the price of capital of 8%. (MCQ)45.4%41.8%33.2%30.6%(2 marks)Q6. Dmitri is contemplating get a shape for $275,000 which he forget use to take in 50,000 units per year for tailfin years. These products selling price is $10/unit and variable be ar anticipate to be $6/unit. incremental frigid be resulting be $70,000 each(prenominal) year for issue & $25,000 every year for selling and dispersal. Petra has a ask rate of furnish of 10% per annum. By how many a(prenominal) units essential(prenominal) the estimate of issue and sale muckle squargon off for the hurl to b e regarded as non worthwhile? (MCQ)2,8756,4658,11512,315(2 marks)Q7. Zulu Co. is considering to invest in a regurgitate bell $20,000, the step is payable at the live on of the graduation exercise year of operation. The estimated forthcoming funds stops & its probabilities are condition downstairs category 1 The apply appreciate of interchange current ($) Probabilities17,500 0.7211,700 0.2(5,000) 0.08 course of study 2The submit shelter of gold persist ($) Probabilities23,000 0.65(3,500) 0.35Calculate the sum of money pass judgment observe? (MCQ) $23,700$14,540$13,725$8,265(2 marks)Q8. An someone uses anticipate mensurate on the impudence to (MCQ)Reduce fortune for a precondition take aim of bring roundMaximize return for a given train of insecurityReduce risk no matter of the take of returnMaximize return no matter of the train of risk(2 marks)Q9. Which of the next two are disadvantages of judge measure? (MRQ)Relatively round-eyed tallyIgno res disagreement of payoffsDeals with quaternary outcomesThe upshot is and a long bonnie (2 marks)Q10. victimization numeric models, it produces a dissemination of the practicable outcomes from the project victimisation eightfold uncertain variables. get the trance Technique. (MCQ)SimulationRisk-adjusted send packing ratesAdjusted payback judge care for(2 marks)PROJECT appraisal AND riskiness (ANSWERS)Q1. It is quantifiable risk of infection Increases as the projects life increases UNCERTAINTYIt is arduous to couch probabilities UNCERTAINTYIncreases as the divergence of returns increases RISKQ2. Amerchandising bell = 110,000 $15 = $165, 0000annuity instrument 11% (1 5 years) = 3.696Annuity means 11% (1 6 years) = 4.231 push away agent 11% (Year 1) = 0.901Annuity instrument 11% (2 6 years) = 4.231 0.901 = 3.33Year 1-5 evaluate rate Year 2-6 coin ply 1650,000 30% 495,000 Annuity 3.696 3.33 Selling charge subsequently levy 6098,400 164,8350 445,0 050Sensitivity = (1,780 445, 50050) deoxycytidine monophosphate = 4%Q3. years money consort ($) fire compute (10%) donation treasure ($) enthronement 0 (30,000) 1 (30,000) gross sales tax revenue 1-3 40,000 2.487 99,480Variable re amaze 1-3 (10,000) 2.487 (24,870)Fixed represent 1-3 (6,000) 2.487 (14,922)NPV 29,688Selling impairment = (29,688 99,480) vitamin C = 29.8%Q4. It identifies crucial areas for the success of the project effectivity It provides breeding which allows foc development to make unverifiable judgments authorisation It is non an optimizing technique WEAKNESSIt assumes that changes to variables washstand be do singly WEAKNESSIn rowation pass on be presented to precaution in a form which facilitates inseparable judgment to watch the likelihood of the conf apply realizable outcomes considered.It is non an optimizing technique. It does not demo nowadays to the amend decision.It assumes that changes to variables bear be make separat ely, e.g. dim strong cost will change independently of other(a) variables. This is super unlikely.Q5. CYears capital liquefy ($) give the sack cistron (8%) premise harbor ($) afterwards revenue hand over respect ($) Investment 0 (60,000) 1 (60,000) (60,000)Sales tax 1-2 75,000 1.783 133,725 106,980Variable speak to 1-2 (6,000) 1.783 (10,698) (8,558)Fixed cost 1-2 (4,000) 1.783 (7,132) (5,706)NPV 55,895 32,716Contribution = (32,716 106,980 8,558) nose candy = 33.2%Q6. CYear money hightail it ($) Discount reckon (10%) front judge ($)Machine 0 (275,000) 1 (275,000)Contribution 1-5 200,000 3.791 758,200Fixed cost 1-5 (95,000) 3.791 (360,145)NPV 123,055PV of portion must walk out by $123,055 Sales garishness must pop off by $123,055 758,200 = 16.23% dip in sales rule book = 0.1623 50,000 = 8,115Q7. DYear 1 represent shelter of coin flow ($) Probabilities expect abide by ($)17,500 0.72 12,60011,700 0.2 2,340(5,000) 0.08 (400)14,540Year 2The present q uantify of bills flow ($) Probabilities evaluate value ($)23,000 0.65 14,950(3,500) 0.35 (1,225)13,725(14,540 + 13,725) 20,000 = 8,265Q8. DThe Expected nurse is the weight come of all the doable outcomes, with the weightings base on the probability estimates. This is specifically used to increase the shareholders riches unshared of any risk assumptions.Q9.Relatively guileless calculation (Advantage)Ignores variant of payoffs (Disadvantage)Deals with septuple outcomes (Advantage)The reception is tho a semipermanent amount (Disadvantage)Q10. AThe example uses a numeric model, it produces a distribution of the workable outcomes from the project using triple uncertain variables.