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You have produced revenue and expense forecasts for the four years of operation of the proposed investment in Part (1). Year (1) sales revenue for the new machine is uncertain, but expected to be in the range of £32,000,000 - 80,000,000. Sales are expected to grow at an annual rate of 15%.
Year (1) Sales revenue (£000)
Probability
32,000
0.2
60,000
0.3
80,000
0.5
Anticipated expenses related to the new machine are as follows:
Expense Type
£000
Additional Information
Cost of goods sold
22,000
Rise by 15% per annum
Distribution costs:
Depreciation
4400
No change
Bad debts
1200
Advertising
2800
Rise by 10% per annum
Administrative expenses:
Rent
1600
Salaries and wages
8,000
Miscellaneous expenses
4000
Increase of 10% in Year 3
Additional information:
Required:
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