Question
Perform sensitivity analysis on the NPV for the given projects. Project Initial Investment Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3
Perform sensitivity analysis on the NPV for the given projects.
Project | Initial Investment | Cash Flow Year 1 | Cash Flow Year 2 | Cash Flow Year 3 | Discount Rate | Base NPV |
Q | $200,000 | $60,000 | $80,000 | $100,000 | 10% | $20,000 |
R | $250,000 | $70,000 | $90,000 | $120,000 | 12% | $25,000 |
What is the NPV for Project Q if the cash flows are increased by 10%?
What is the NPV for Project R if the cash flows are decreased by 10%?
Requirement: Perform sensitivity analysis under different conditions.
What is the NPV for Project Q if the discount rate increases to 12%?
What is the NPV for Project R if the discount rate decreases to 10%?
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Survey of Accounting
Authors: Carl S. Warren
8th edition
1305961889, 978-1337517386, 1337517380, 978-1305961883
