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hi,
In the question 10. B) part II calculate the minimum target contribution…I’m struggling to understand in the equation below:
(4 x X x 0.893) + (9 x X x 0.797) + (5 x X x 0.712)= 0.426932
where X= change the contribution to sales ratio (%)
where the numbers 4, 9 and 5 are coming from??
Thank you in advance for your reply
So, 0·426932 is the negative NPV (in $m) from b(i) and this must be extinguished if the project is just to break even.
The budgeted revenue for 2009 for Nellie is 80,000 x 50 = 4m
If X is the CSR, then the contribution will be X x 4Similarly, for 2010, revenue will be 180,000 x 50 = 9m and for 2011 5m
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