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how to solve this problem (d) We will now perform a sensitivity analysis by recalculating the NPV by changing the value of one variable at
how to solve this problem
(d) We will now perform a sensitivity analysis by recalculating the NPV by changing the value of one variable at a time. Consider the following base, low and high values for each of the input variables listed below. Base value Unit price Annual unit sales Variable cost per unit Expected salvage value Tax rate Required rate of return $6.50 52,000 $1.75 $45,000 35 percent 11 percent Low value $6.00 50,000 $1.50 $30,000 High value $7.00 55,000 $2.00 $60,000 40 percent 13 percent 30 percent 10 percent Fill out the table below by recalculating the NPV under each individual change. Project NPV Variable With low estimate with high estimate Range of estimates Unit price Annual unit sales Variable cost per unit Expected salvage value Tax rate Required rate of return (e) Which of the variables has the most effect on NPV? How do you explain it? (d) We will now perform a sensitivity analysis by recalculating the NPV by changing the value of one variable at a time. Consider the following base, low and high values for each of the input variables listed below. Base value Unit price Annual unit sales Variable cost per unit Expected salvage value Tax rate Required rate of return $6.50 52,000 $1.75 $45,000 35 percent 11 percent Low value $6.00 50,000 $1.50 $30,000 High value $7.00 55,000 $2.00 $60,000 40 percent 13 percent 30 percent 10 percent Fill out the table below by recalculating the NPV under each individual change. Project NPV Variable With low estimate with high estimate Range of estimates Unit price Annual unit sales Variable cost per unit Expected salvage value Tax rate Required rate of return (e) Which of the variables has the most effect on NPV? How do you explain itStep by Step Solution
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