A project with an estimated life of 10 years is being considered which has the following details:
(a) capital outlay – £350,000
(b) annual sales – 500 units
(c) selling price – £220 per unit
(d) variable cost – £40 per unit
(e) fixed cost – £25,000 per year.
Requirement
Perform a sensitivity analysis on the above figures by calculating the effect of a 10 per cent adverse variation in each of the above five elements (a)–(e) independently. Calculate the revised IRR in each case.