A company is appraising a capital investment project, which has the following cash flows and present values: Year Cash f

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A company is appraising a capital investment project, which has
the following cash flows and present values:
Year
Cash flow
£
Discount factor at 10%
Present value
£
0
Initial investment
(120,000)
1.000
(120,000)
1-4
Annual contribution
98,000
3.170
310,660
1-4
Annual fixed costs
(52,000)
3.170
(164,840)
4
Scrap value
5,000
0.683
3,415
What is the sensitivity of the investment project to a change in
annual fixed costs (to 1 decimal place)?
a.
70.2%
b.
5.7%
c.
55.7%
d.
17.7%