Initial Assumption Worst Case $30,000 $27,000 Best Case $33,000 6% Parameter Sales in Year 1 NPV Sales Growth through Year 6 NPV Cost of Goods Sold (% of Sales) NPV Cost of Capital NPV 0% 10% 72% 77% 67% 20% 23% 17% For example, vary the parameter Sales in Year 1" from the worst case $27,000 to the best case $33,000, holding all the other parameters fixed (at the level of initial assumptions). Then fill in the highlighted blank boxes for NPV in Excel. Do the same thing for the other three parameters. Suppose you are the financial manager, if you are asked to use limited resources to refine the assumption on ONLY ONE of the above four parameters, which one should you choose and why? Write your answer in Excel. J K I M N P Sensitivity Analysis Parameter Initial Assumption Worst Case Best Case Sales in Year 1 $30,000 $27,000 $33,000 NPV Sales Growth through Year 6 6% 0% 10% NPV Cost of Goods Sold (% of Sales) 72% 77% 67% NPV Cost of Capital 20% 23% 17% NPV Question: Suppose you are the financial manager, If you are asked to use limited resources to refine the assumption on ONLY ONE of the above four parameters, which one should you choose and why? (fill in the blanks highlighted in yellow) Answer: Initial Assumption Worst Case $30,000 $27,000 Best Case $33,000 6% Parameter Sales in Year 1 NPV Sales Growth through Year 6 NPV Cost of Goods Sold (% of Sales) NPV Cost of Capital NPV 0% 10% 72% 77% 67% 20% 23% 17% For example, vary the parameter Sales in Year 1" from the worst case $27,000 to the best case $33,000, holding all the other parameters fixed (at the level of initial assumptions). Then fill in the highlighted blank boxes for NPV in Excel. Do the same thing for the other three parameters. Suppose you are the financial manager, if you are asked to use limited resources to refine the assumption on ONLY ONE of the above four parameters, which one should you choose and why? Write your answer in Excel. J K I M N P Sensitivity Analysis Parameter Initial Assumption Worst Case Best Case Sales in Year 1 $30,000 $27,000 $33,000 NPV Sales Growth through Year 6 6% 0% 10% NPV Cost of Goods Sold (% of Sales) 72% 77% 67% NPV Cost of Capital 20% 23% 17% NPV Question: Suppose you are the financial manager, If you are asked to use limited resources to refine the assumption on ONLY ONE of the above four parameters, which one should you choose and why? (fill in the blanks highlighted in yellow)