Question

1 Approved Answer

Posted on Sep 06, 2024

8. Inputs Initial investment ($ thousands) Salvage value ($ thousands) Initial revenues ($ thousands) Variable costs (% of revenues) Initial fixed costs ($ thousands) Inflation

image text in transcribed

8. Inputs Initial investment ($ thousands) Salvage value ($ thousands) Initial revenues ($ thousands) Variable costs (% of revenues) Initial fixed costs ($ thousands) Inflation rate (%) Discount rate (%) Receivables (% of sales) Inventory (% of next year's costs) Tax rate (%) 10,000 2,000 15,000 40.0% 4,000 5. 0% 12. 0% 16. 7% 15. 0% 21.0% Year: 0 1 2 3 4 5 6 B. Fixed assets Investments in fixed assets Sales of fixed assets Cash flow from fixed assets 10,000 1, 580 1, 580 -10,000 C. Operating cash flow Revenues ariable expenses Fixed expenses Depreciation Pretax profit Profit after tax Operating cash flow 15, 000 6,000 4,000 2,000 3,000 630 2, 370 4, 370 15, 750 6, 300 4, 200 2,000 3, 250 683 2, 568 4, 568 16,538 6, 615 4, 410 2,000 3,513 738 2, 775 4, 775 17, 364 6, 946 4, 631 2,000 3, 788 796 2,993 4, 993 18, 233 7, 293 4, 862 2,000 4, 078 856 3, 221 5, 221 D. Torking capital Working capital 1,500 Change in working capital 1,500 Cash flow from investment in working capit -1,500 4, 075 2,575 -2, 575 0.408 4, 279 204 -204 0.408 4, 493 214 -214 0.408 4, 717 225 -225 0.408 3,039 -1, 679 1,679 0.250 0 -3, 039 3,039 E. Project valuation Total project cash flow Discount factor PV of cash flow Vet present value -11, 500 1.000 -11,500 6, 113. 1 1, 795 0.893 1,603 4, 364 0.797 3, 479 4, 561 0.712 3, 246 4, 768 0.636 3,030 6, 900 0.567 3, 915 4, 619 0.507 2, 340 Blooper's analysts have come up with the following revised estimates for its magnoosium mine: Initial investment Revenues Variable costs Fixed costs Working capital Range Pessimistic Optimistic + 50% 25% - 15% + 20% + 10% 10% + 50% 30% + 50% 50% Conduct a sensitivity analysis for each variable and range and compute the NPV for each. Use Spreadsheet 10.1 and accompanying data as a starting point for the analysis. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in thousands rounded to the nearest whole dollar.) Project NPV Expected Pessimistic Optimistic Initial investment Revenues Variable costs Fixed costs Working capital 8. Inputs Initial investment ($ thousands) Salvage value ($ thousands) Initial revenues ($ thousands) Variable costs (% of revenues) Initial fixed costs ($ thousands) Inflation rate (%) Discount rate (%) Receivables (% of sales) Inventory (% of next year's costs) Tax rate (%) 10,000 2,000 15,000 40.0% 4,000 5. 0% 12. 0% 16. 7% 15. 0% 21.0% Year: 0 1 2 3 4 5 6 B. Fixed assets Investments in fixed assets Sales of fixed assets Cash flow from fixed assets 10,000 1, 580 1, 580 -10,000 C. Operating cash flow Revenues ariable expenses Fixed expenses Depreciation Pretax profit Profit after tax Operating cash flow 15, 000 6,000 4,000 2,000 3,000 630 2, 370 4, 370 15, 750 6, 300 4, 200 2,000 3, 250 683 2, 568 4, 568 16,538 6, 615 4, 410 2,000 3,513 738 2, 775 4, 775 17, 364 6, 946 4, 631 2,000 3, 788 796 2,993 4, 993 18, 233 7, 293 4, 862 2,000 4, 078 856 3, 221 5, 221 D. Torking capital Working capital 1,500 Change in working capital 1,500 Cash flow from investment in working capit -1,500 4, 075 2,575 -2, 575 0.408 4, 279 204 -204 0.408 4, 493 214 -214 0.408 4, 717 225 -225 0.408 3,039 -1, 679 1,679 0.250 0 -3, 039 3,039 E. Project valuation Total project cash flow Discount factor PV of cash flow Vet present value -11, 500 1.000 -11,500 6, 113. 1 1, 795 0.893 1,603 4, 364 0.797 3, 479 4, 561 0.712 3, 246 4, 768 0.636 3,030 6, 900 0.567 3, 915 4, 619 0.507 2, 340 Blooper's analysts have come up with the following revised estimates for its magnoosium mine: Initial investment Revenues Variable costs Fixed costs Working capital Range Pessimistic Optimistic + 50% 25% - 15% + 20% + 10% 10% + 50% 30% + 50% 50% Conduct a sensitivity analysis for each variable and range and compute the NPV for each. Use Spreadsheet 10.1 and accompanying data as a starting point for the analysis. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in thousands rounded to the nearest whole dollar.) Project NPV Expected Pessimistic Optimistic Initial investment Revenues Variable costs Fixed costs Working capital