Question
A machine is estimated to cost Php70,000 to install at a little food kiosk. It is also expected to generate annual cash net income of
A machine is estimated to cost Php70,000 to install at a little food kiosk. It is also expected to generate annual cash net income of Php15,000 for a projected 10 year lifetime. It also is expected to have a market value of Php15,000 at the end of its lifetime. The investment MARR is 15 % (before tax). We would like to determine if the machine an acceptable investment using Present Worth. There is a +/- 40% range of estimated costs on the four parameters: 1) Initial investment, 2) the annual receipts, 3) the probable salvage market value and 4) its 10 year lifetime. Create a spidergraph of the Present worths to show a sensitivity analysis of the machine investment if each of the four parameters are varied one parameter at a time while holding all other parameters at the estimated expected values.
A. Based on the spidergraph sensitivity analysis, which of the following parameters can vary from -40% to +40% error from the expected value and still would not change the decision to accept the machine?
B. Based on the spidergraph sensitivity analysis, which of the following parameters can have largest swings in acceptability of the machine? This parameter rightfully deserves closer accuracy in having correct estimates.
C. Upload an image of your spiderchart. Y-axis should have present value, X axis is the error in estimate ranging from -40% to +40% in 10% increments. It is preferred if you also include the table of Present worths from which the graph was based on.
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