11. What will be below project NPV if the sales drops 30%? Make a Sensitivity analysis. Project life is 3 years with 100% Depreciation bonus.

WACC	10.0%
Equipment cost	$75,000
Required net operating working capital (NOWC)	$15,000
Annual sales revenues	$73,000
Annual operating costs	$25,000
Tax rate	25.0%

Equip Cost (1 T)	WACC =10.0%	-$56,250
Investment in NOWC		-$15,000
Sales revenues			$73,000	$73,000	$73,000
Operating costs			25,000	25,000	25,000
Operating income (EBIT)			$48,000	$48,000	$48,000
Taxes	rate =25.0%		12,000	12,000	12,000
EBIT(1 T)			$36,000	$36,000	$36,000
Recovery of NOWC					15,000
Project CFs		-$71,250	$36,000	$36,000	$51,000

What is the NPV of this project?

What is the NPV with 30% drop in sales?

12) Calculate below project Expected NPV. What is the project Standard Deviation? What is the project Coefficient of Variance.? (Scenario Analysis)

Probability	Predicted cash flow for each year					WACC	NPV
	0	1	2	3	4
25%	-$750	$3300	$3131	$2920	$2637	7.5%
50%	-$1000	$500	$400	$300	$100	10%
25%	-$1250	$-$1530	-$1579	-$1602	-$1708	12.5%
Expected NPV
Standard Deviation
Coefficient of Variation (CV): Std Dev /Expected NPV