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Bloopers analysts have come up with the following revised estimates for its magnoosium mine: Range Pessimistic Optimistic Initial investment + 40 % 25 % Revenues

Bloopers analysts have come up with the following revised estimates for its magnoosium mine:

Range

Pessimistic Optimistic
Initial investment + 40 % 25 %
Revenues 20 % + 20 %
Variable costs + 25 % 20 %
Fixed cost + 40 % 20 %
Working capital + 40 % 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.)

Project NPV

Pessimistic Expected Optimistic
Initial Investment
Revenues
Variable Cost
Fixed Cost
Working Capital
A. Inputs
Initial investment ($ thousands) 10,000
Salvage value ($ thousands) 2,000
Initial revenues ($ thousands) 15,000
Variable costs (% of revenues) 40.0%
Initial fixed costs ($ thousands) 4,000
Initial total expenses ($ thousands) 10,000
Inflation rate (%) 5.0%
Discount rate (%) 12.0%
Receivables (% of sales) 16.7%
Inventory (% of next year's costs) 15.0%
Tax rate (%) 35.0%
Year: 0 1 2 3 4 5 6
B. Fixed assets
Investments in fixed assets 10,000
Sales of fixed assets 1,300
Cash flow from fixed assets -10,000 1,300
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 2,000 2,000 2,000 2,000 2,000
Pretax profit 3,000 3,250 3,513 3,788 4,078
Tax 1,050 1,138 1,229 1,326 1,427
Profit after tax 1,950 2,113 2,283 2,462 2,650
Operating cash flow 3,950 4,113 4,283 4,462 4,650
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 -11,500 1,375 3,909 4,069 4,238 6,329 4,339

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