QUESTION 2 a) A financial analyst for a manufacturer of BMV spare part is considering using its new engine. The production of the engine can be used over the 4 years, with zero salvage value at the...

Extracted text: QUESTION 2 a) A financial analyst for a manufacturer of BMV spare part is considering using its new engine. The production of the engine can be used over the 4 years, with zero salvage value at the end of year 4. The project's initial investment is RM60,000 which depreciates under straight-line method and its discount rate is 10 percent. The firm's corporate tax rate is 40 percent. Optimistic 800 Items Expected 500 Pessimistic 200 Unit sales (unit) Price/unit (RM) Variable cost/unit (RM) Fixed costs/annum (RM) 75 65 100 50 2000 60 3000 30 1000 Given the above information on the results of launching the new engine, you are required to compute: iii) Evaluate the sensitivity of your base case operating cash flow (OCF) if the fixed cost increases as upper bound's fixed costs and interpret the changes in the figure.