Blooper's analysts have come up with the following revised estimates for its magnoosium mine:

Range

PessimisticOptimistic

Initial investment +40% -20%

Revenues - 20 % + 25 %

Variable costs + 20 % - 15 %

Fixed cost + 50 % - 50 %

Working capital +35% -35%

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.)

A. Inputs

Initial investment ($ thousands) 15,000

Salvage value ($ thousands) 2,000

Initial revenues ($ thousands) 15,000

Variable costs (% of revenues) 40.0%

Initial fixed costs ($ thousands) 4,000

Inflation rate (%) 5.0%

Discount rate (%) 12.0%

Receivables (% of sales) 16.7%

Inventory (% of next year's costs) 15.0%

Tax rate (%) 21.0%

Year: 0 1 2 3 4 5 6

B. Fixed assets

Investments in fixed assets 15,000

Sales of fixed assets 1,580

Cash flow from fixed assets -15,000 1,580

C. Operating cash flow

Revenues 15,000 15,750 16,538 17,364 18,233

Variable expenses 6,000 6,300 6,615 6,946 7,293

Fixed expenses 4,000 4,200 4,410 4,631 4,862

Depreciation 3,000 3,000 3,000 3,000 3,000

Pretax profit 2,000 2,250 2,513 2,788 3,078

Tax 420 473 528 586 646

Profit after tax 1,580 1,7781, 985 2,203 2,431

Operating cash flow 4,580 4,778 4,985 5,203 5,431

D. Working capital

Working capital 1,500 4,075 4,279 4,493 4,717 3,039 0

Change in working capital 1,500 2,575 204 214 225 1,679 -3,039

Cash flow from investment in working capital -1,500 -2,575 -204 -214 -225 1,679 3,039

0.408 0.408 0.408 0.408 0.250

E. Project valuation

Total project cash flow -16,500 2,005 4,574 4,771 4,978 7,110 4,619

Discount factor 1.000 0.893 0.797 0.712 0.636 0.567 0.507

PV of cash flow -16,500 1,790 3,646 3,396 3,164 4,034 2,340

Net present value 1,870.1

Project NPV

pessimistic expected optimistic

Initial investment

Revenue

Variable costs

Fixed Costs

Working capital