c. Now conduct a scenario analysis. Assume that there is a 20% probability that best-case conditions, with each of the variables discussed in Part b being 20% better than its base-case value, will occur. There is a 20% probability of worst-case conditions, with the variables 20% worse than base, and a 60% probability of base-case conditions. Round your answers for the NPV and standard deviation to the nearest dollar and for the coefficient of variation to two decimal places. Use a minus sign to enter a negative value, if any. \begin{tabular}{|c|c|c|c|c|c|c|c|} \hline & A & B & C & D & E & F & G \\ \hline 33 & & & \multicolumn{5}{|c|}{ Years } \\ \hline 34 & Cash Flow Forecast & & 0 & 1 & 2 & 3 & 4 \\ \hline 35 & Sales revenue & & & & & & \\ \hline 36 & Variable costs (excl. depr.) & & & & & & \\ \hline 37 & Nonvariable costs (excl. depr.) & & & & & & \\ \hline 38 & Depreciation & & & & & & \\ \hline 39 & Operating income before taxes & & & & & & \\ \hline 40 & Taxes on operating income & & & & & & \\ \hline 41 & Net operating profit after taxes & & & & & & \\ \hline 42 & Add back depreciation & & & & & & \\ \hline 43 & Equipment purchases & & & & & & \\ \hline 44 & Cash flow due to change in NWC & & & & & & \\ \hline 45 & Net cash flow due to sale of equipment & & & & & & \\ \hline 46 & Project's net cash flows & & & & & & \\ \hline \multicolumn{8}{|l|}{47} \\ \hline 48 & NPV & & \multicolumn{5}{|l|}{ \#N/A } \\ \hline 49 & IRR & & \multicolumn{5}{|l|}{ \#N/A } \\ \hline 50 & & & & & & & \\ \hline 51 & & & \multicolumn{5}{|c|}{ Years } \\ \hline 52 & & & 0 & 1 & 2 & 3 & 4 \\ \hline 53 & & Net cash flow & & & & & \\ \hline 54 & \multicolumn{7}{|c|}{ Cumulative net cash flow } \\ \hline 55 & \multicolumn{7}{|c|}{ Part of year required for payback } \\ \hline 56 & & & & & & & \\ \hline 57 & Regular payback period (years) & & \#N/A & & & & \\ \hline \end{tabular} b. Now conduct a sensitivity analysis to determine the sensitivity of NPV to changes in the sales price, variable costs per unit, and number of units sold. Set these variables' values at 10% and 20% above and below their base-case values. Round your answers to the nearest dollar. Use a minus sign to enter a negative value, if any. \begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline \multicolumn{9}{|c|}{:fx} \\ \hline & A & B & c & D & E & F & G & H \\ \hline \multicolumn{9}{|l|}{117} \\ \hline \multicolumn{9}{|l|}{118} \\ \hline \begin{tabular}{l} 120 \\ 121 \end{tabular} & Scenario & Probability & \begin{tabular}{c} Unit \\ Sales \end{tabular} & \begin{tabular}{c} Sales Price, \\ Year 1 \end{tabular} & \begin{tabular}{c} Variable Cost \\ per Unit, Year 1 \end{tabular} & NPV & \multicolumn{2}{|l|}{ Formulas } \\ \hline 122E & Best Case & 20% & 0 & $0 & $0 & & \multicolumn{2}{|l|}{ \#N/A } \\ \hline 123E & Base Case & 60% & 0 & $0 & $0 & & \multicolumn{2}{|l|}{#N/A} \\ \hline 124V & Worst Case & 20% & 0 & $0 & $0 & & \#N/A & \\ \hline \multicolumn{9}{|c|}{125} \\ \hline 126E & Expected NPV & & \multicolumn{4}{|l|}{ \#N/A } & & \\ \hline 127 & Standard Deviation & & \multicolumn{4}{|l|}{ \#N/A } & & \\ \hline 128C & Coefficient of Variation & & \multicolumn{4}{|l|}{# N/A } & & \\ \hline \multicolumn{9}{|l|}{129} \\ \hline \multicolumn{9}{|c|}{130 d. If the project appears to be more or less risky than an average project, finding its risk-adjusted NPV, IRR, and payback } \\ \hline \multicolumn{9}{|l|}{131} \\ \hline 132c & CV range of firm's average-risk project: & 0.7 & to & 1.3 & & & & \\ \hline 133L & Low-risk WACC & 11% & & & & & & \\ \hline 134V & WACC & 14% & & & & & & \\ \hline \multicolumn{9}{|c|}{136} \\ \hline 137F & Risk-adjusted WACC & & \multicolumn{3}{|l|}{#N/A} & & & \\ \hline 138F & Risk-adjusted NPV & & \multicolumn{3}{|l|}{ \#N/A } & & & \\ \hline 139F & Risk-adjusted IRR & & \multicolumn{3}{|l|}{ \#N/A } & & & \\ \hline 140F & Risk-adjusted regular payback period (years) & & \multicolumn{3}{|l|}{ \#N/A } & & & \\ \hline 141 & & & & & & & & \\ \hline 142 & & & & & & & & \\ \hline \end{tabular} Start with the partial model in the file Ch13 P18 Build a Model.xIsx. Webmasters.com has developed a powerful new server that would be used for corporations' Internet activities. It would cost $12 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 11% of the year's projected sales; for example, NWC0=11% (Sales 1 ). The servers would sell for $27,000 per unit, and Webmasters believes that variable costs would amount to $18,500 per unit. After Year 1 , the sales price and variable costs will increase at the inflation rate of 5%. The company's nonvariable costs would be $2 million at Year 1 and would increase with inflation. The server project would have a life of 4 years. If the project is undertaken, it must be continued for the entire 4 years. Also, the project's returns are expected to be highly correlated with returns on the firm's other assets. The firm believes it could sell 1,100 units per year. The equipment would be depreciated over a 5-year period, using MACRS rates. The estimated market value of the equipment at the end of the project's 4-year life is $600,000. Webmasters.com's federal-plus-state tax rate is 25%. Its cost of capital is 14% for average-risk projects, defined as projects with a coefficient of variation of NPV between 0.7 and 1.3. Low-risk projects are evaluated with a 11% project cost of capital and high-risk projects at 16%. The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Download spreadsheet Ch13 P18 Build a Model-b393ee.xlsx a. Develop a spreadsheet model, and use it to find the project's NPV, IRR, and payback. Round your answer for the NPV to the nearest dollar and for the IRR and payback to two decimal places. NPV $ IRR % Regular payback period years