1. Construct a spreadsheet in Excel that calculates the NPV for the base case for a project that is expected to last 6 years. Assume that the initial cost of assets will be: $40,000. You may assume that the initial sales price of the product is $15.00 per unit and variable costs are $10.00 per unit. Fixed costs will be $5,000. Assume straight-line depreciation over a 10 year depreciable life.

Working capital requirements will be 8% of sales, and the estimated salvage value of the assets will be 30% of the original cost. The tax rate is 40% and the cost of capital is 9%. You can determine the level of sales (in units) needed each year, assuming no growth, in order to find an NPV that will give you a profitability index of 1.1. This will be your base case.

2. Now conduct a sensitivity analysis that allows each of the following items to vary by 10%, 20% and 30% above and below the initial values in #1 above:

a) The cost of capital

b) The initial cost of assets

c) The sales price

Also conduct a sensitivity analysis for the growth rate in sales for growth rates of -10%, -5%, 0%, 5%, 10%, 15% and 20%. The growth in sales can apply to all years units sold.

Please show the results of all 4 sensitivities on one graph, and in one table.