Question
Net Working Capital (NWC): Roll paper sits 7 days in the warehouse while precut paper sits only 4 days. Therefore the level of working capital
Net Working Capital (NWC): Roll paper sits 7 days in the warehouse while precut paper sits only 4 days. Therefore the level of working capital for old machines in a given year will be [7/240 line 1 + 4/240 line 5]. The level of working capital for a new machine in a given year will be [7/240 line 1].
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Please conduct sensitivity analysis and estimate the impact on incremental NPV of the replacement decision from a change in any of the following elements:
a. Downstream waste of the new machine is 0.8%. What about 1.6%?
b. The annual growth in necessary volume is 3%. What about 7%?
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