***Original Spreadsheet Attached

Section 4 Create a second valuation spreadsheet of the projects provided by your instructor. This should measure the sensitivity of the project as reflected by a 10% reduction in price. Evaluate both projects according to the following valuation method:

1. Net Present Value of Discounted CashFlow (use WACC number for discount rate)

Provide a synopsis evaluation of each project and provide a clear recommendation of which project management will accept for its capital expenditures budget based on textbook decision rules.

Section 5

Create a third valuation spreadsheet of the projects provided by your instructor. This should measure the sensitivity of the project as reflected by a 10% reduction in sales volume. Evaluate both projects according to the following valuation method:

1. Net Present Value of Discounted CashFlow (use WACC number for discount rate)

Provide a synopsis evaluation of each project and provide a clear recommendation of which project management will accept for its capital expenditures budget based on textbook decision rules.

Section 6

Provide an evaluation of all the analyses from the previous sections and explain the implication of sensitive analysis on pro forma estimates of future projects. Discuss the benefits and limitations of this analysis and how it could be used in the professional environment.

Project Template Price Variable Cost Required Return Salvage Value Initial Cost Installation Cost Increase in NWC $ $ $ $ $ $ 20.00 10.00 9.49% 150,000 2,000,000 130,000 250,000 Year 0 Fixed Cost Units sold Depreciation Rate $470,400 $ $ $ Internal Rate of Return Net Present Value Payback Period Profitability Index Year 1 Year 2 70,000 100,000 20.0% 32.0% 1 2 $1,400,000 $2,000,000 $700,000 $1,000,000 $200,000 $200,000 $500,000 $800,000 $426,000 $681,600 $74,000 $118,400 $29,600 $47,360 $44,400 $71,040 Sales Variable Cost Fixed Cost EBITDA Depreciation EBIT Tax Expense Net Income Operating Cash Flow Non-operating Cash Flow Capital Expenditures Cash Flow Net Working Capital Cash Flow 11.80% 14.21% 14.54% WACC $ $752,640 Inflation Rate 7.08% 14.37% 11.49% 0% Tax Rate D $52,486,800 E $85,000,000 P $9,000,000 Value of FirmV$146,486,800 Year 3 Year 4 65,000 70,000 19.0% 12.0% 3 4 $1,300,000 $1,400,000 $650,000 $700,000 $200,000 $200,000 $450,000 $500,000 $404,700 $255,600 $45,300 $244,400 $18,120 $97,760 $27,180 $146,640 $431,880 $402,240 Year 5 Year 6 65,000 55,000 11.0% 6.0% 5 6 $1,300,000 $1,100,000 $650,000 $550,000 $200,000 $200,000 $450,000 $350,000 $234,300 $127,800 $215,700 $222,200 $86,280 $88,880 $129,420 $133,320 $363,720 (2,130,000) (250,000) Year 0 (2,380,000) 40% 0.3583 0.5803 0.0614 1.0000 $261,120 $90,000 $ Total Cash Flows Year 1 Year 2 $470,400 $752,640 7.51% (133,542) 4.11 Years 1.05 Year 3 $431,880 Year 4 $402,240 Year 5 $363,720 250,000 Year 6 $601,120