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I. Instructions: This case is designed to be an excel spreadsheet case. Please show your work by using formulas and cell references in excel. Use
I. Instructions: This case is designed to be an excel spreadsheet case. Please show your work by
using formulas and cell references in excel. Use the excel spreadsheet template that is available on
Canvas, under Assignments, for more details. You may round to two decimal places in your calculations.
Suppose Nautical Adventures, Inc., is considering the following project all dollar figures are in
thousands of dollars
In year the project requires an $ investment in plant and equipment. This
equipment is depreciated using the straightline method over seven years, and has a
salvage value aftertax of $ in year
The project is expected to generate sales of units in year Details on the annual unit
sales are given in the spreadsheet template, highlighted in yellow.
Sales revenue per unit is forecast to be $ in year and then grow with inflation.
Variable cost per unit is forecast to be $ in year and then grow with inflation.
Cash fixed costs are forecast to be $ in year and then grow with inflation.
The inflation rates that apply each year to sales, VC and FC are shown in the spreadsheet.
The company uses a discount rate to evaluate new product decisions.
The tax rate is forecast to be a constant
The project will require working capital in the amount of $ in year for every unit of
next year's forecasted sales, and this amount $ will grow with inflation going forward.
questions:
Suppose you need to do some sensitivity analysis please show on separate worksheet tab:
a What if the firm suspects that this project is riskier than the firm's average project and
decides to increase the cost of capital to What is the NPV
b What if the firm fears that its variable costs may be higher than estimated? What if the
variable costunit starts off at $ in year and then grows with inflation what is the
NPVassume the original cost of capital of
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