Research Paper on:
Accounting Case Study; Calculation to Determine the Feasibility of a Project

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and end value the calculation can be carried out to see if this is a project worth undertaking. In all cases there are the same capital costs. With an initial  investment of $3 million and $2.5 million used as the launch marketing there is an initial budget required of $5.5 million. There is also a requirement for $500,000 working capital  and the value at the end of five years is $800,000. We also have sales figures given in both a pessimistic and an optimistic form. Unfortunately, we do not have  the unit cost for each item, only the fixed costs, but we do know that the total contribution will be between 42% and 58%. The contribution is the amount that  goes to pa the fixed costs, and after these are paid will then be the profit over and above the unit cost of each unit sold. This gives us some  figure to use to calculate the potential of the project. If we look at the different variables then the potential may be seen. If we look at the pessimistic scenario,  remembering that there is an initial capital investment of $5.5 million then with a contribution level of 42% it appears that the project will not break even. Pessimistic with  a 42% contribution Year Sales (a) Contribution % (b) Contribution amount (a x b) 1 800,000 42 336,000 2 1,200,000 42 504,000 3 1,000,000 42 420,000 4 800,000 42 336,000  5 400,000 42 168,000 Total Contribution 1,764,000 With a total contribution of $1,764,000 this will not come near breaking even, even  if deducting the $800,000 liquidation receipts for the end of the project. Therefore, if this scenario is considered it will not be worth undertaking the project. However, it