The Engineers in a certain company are considering introducing a new product line. The initial...
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The Engineers in a certain company are considering introducing a new product line. The initial investment required for this project is 250,000 OMR and the annual maintenance costs are expected to be 14,500 OMR. Annual operating costs will be directly proportional to the level of production at 11 OMR per unit, and each unit of product can be sold for 45 OMR. The estimated production output is 3000 unit per year. The MARR is 12% per year and the project has a life of 6 years. The initial investment, maintenance costs and production output are estimated to be within 30%. Is this project acceptable from profitability point of view (show your analysis)? Analyze the sensitivity of AW to changes in each estimate individually (i.e.: make a spider plot). Based on your results rank these input factors from the highest sensitivity to the lowest. Calculate the breakeven deviations for the estimates and make recommendation either to accept or reject this project.
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