Refer to Appendix 2. Calculate the forecast net present value (NPV) of the proposed pizza van project over four years.

Mark scheme

Marking points from the official mark scheme (May/June 2020). The mark or mark type is shown in brackets.

1. [4] (a) Correct answer (000s) 200 - (65.10 + 60.20 + 63.20 + 59.20) = NPV = 47.70 ($000)
2. [3] (a) 1 error e.g. not taking off purchase price or working it out for 1 van
3. [2] (a) 2 errors e.g. one van and not taking off purchase price
4. [1] (a) Attempt e.g. some use of discount factors
5. [4] (b) Correct answer $7 – $2.50 = $4.50 per customer X 6000 forecasted = $27000
6. [3] (b) 1 error e.g. staff and van running costs deducted 27 000 - $15500 = $11500
7. [1] (b) Some attempt
8. [2] (b) Correct formula (selling price – variable cost) per unit
9. [1] (c) Knowledge: Meaning of profitability - ability to turn revenue into profit
10. [1] (c) Knowledge: Meaning of sales forecasting
11. [1] (c) Knowledge: Meaning of net present value
12. [1] (c) Knowledge: Meaning of total contribution and importance in profit calculations
13. [1] (c) Application: Reference to and application of results
14. [1] (c) Application: Reference to Gio’s forecasting – does he have the skills?
15. [1] (c) Application: Reference to other points from the text, including Appendix 1 financial information
16. [1] (c) Analysis: Incomes are rising so may suggest demand should rise, but promotion will be needed
17. [1] (c) Analysis: Analysis of reasons why sales forecasting may/not be accurate
18. [1] (c) Analysis: Development of reference to results / comparison of figures with Appendix 1 and comment
19. [1] (c) Evaluation: Improve profitability or not?
20. [1] (c) Evaluation: Short/long term?
21. [1] (c) Evaluation: To what extent might sales forecasts prove inaccurate? Why?