As the financial consultant, what recommendation on the financial viability of the project would you make to the Trytonic Ltd using the NPV. (Present your answer in thousands of GHS)
Trytonic Ltd is considering a new project for manufacture of pocket video games involving a
capital expenditure of GHS 60m and working capital of GHS 15m. The capacity of the plant is for
annual production of 1.2m units and the capacity utilization during the 6-year life of the project is
expected to be as follows:
Year
1
2
3
4 – 6
Capacity utilization One-third
Two-thirds 90 %
100%
The average price per unit of product is expected to be GHS 200 with a contribution per unit of
40% of the selling price. The annual fixed cost, excluding depreciation, are estimated to GHS
24m and GHS 36m for years 1 and 2 respectively, and GHS 48m per year from the third year
onwards. The fixed asset will be
m. The rate of income tax and cost of capital may be taken as 35% and 15% respectively.
At end of the third year, an additional investment of GHS 10m would be required for working
capital. The fixed assets will be sold at 10% of initial cost and working capital will be recouped
fully at the end of the project.
As the financial consultant, what recommendation on the financial viability of the project would
you make to the Trytonic Ltd using the
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