Build a Spreadsheet to estimate the IRR and NPV for the project described below. Assume a discount rate (WACC) of 8%.

Perdido Key Watersports, Inc. (PKW) currently rents pontoon boats, jet skis and kayaks to people vacationing on the Gulf Coast. It has recently decided to explore the possibility of adding a 53 foot catamaran sailboat to its fleet for daily charters and evening sunset cruises. It anticipates that it can rent the boat for $1600 per day for daily charters and expects to have it in use 100 days a year. It also anticipates charging $50/person for the 2-3 hour evening sunset cruise. Over the course of the year it expects to have 1500 passengers on its 200 annual sunset cruises. PKW expects the total number of passengers per year on sunset cruises to be less sensitive to weather due to the ability to go another night, however this might result in larger groups some evenings. The boat is expected to cost $500,000 and will use a 7 year MACRS depreciation schedule. Wanting to maximize the customer experience PKW has decided that they will replace the boat every 7 years. The expected resale value is $350,000. Once we account for the opportunity cost of capital and slip rental, fixed costs are expected to be $62,000 per year. Variable costs are more uncertain and include things like fuel, food and beverages, and crew cost. PKW estimates that variable costs are $200/sunset cruise and $600/day for the daily charter. It is estimated that this venture will require an initial working capital investment of $2000 and an annual investment of $1000 in working capital will be required to keep the boat properly supplied. Given this information, answer the questions below.

The biggest risk of this type of venture is bad weather. Since vacationers dont rent boats when it rains, PKW estimates that the number of days in use for both daily charters as well as sunset cruises could vary by +/- 10%, however the expected number of Sunset Cruise Passengers per year is expected to stay the same due to passengers choosing to go on a different night. What is the impact on NPV under these scenarios?

How sensitive is NPV to changes in the number of Sunset Cruise Days?

How sensitive is NPV to changes in the number of Charter Days?