**********Please answer question number 7***************

Using the spreadsheet provided, please run the following sensitivities:

1. Please take sales up to $630,000 and down to $570,000 (up by 5% and down by 5%) and record the new net present value numbers.

2. Returning to the original numbers, please take disposition value up to $525,000 and down to $475,000 (up by 5% and down by 5%) and record the new net present value numbers.

3. Returning to the original numbers, please take variable costs up for all years to 42% and down to 38% (up by 5% and down by 5%) and record the new net present value numbers.

4. Returning to the original numbers, please take fixed costs up for all years to $231,000 and down to $209,000 (up by 5% and down by 5%) and record the new net present value numbers.

5. Returning to the original numbers, please take the tax rate to up to 29.4% and down to 26.6% (up by 5% and down by 5%) and record the new net present value numbers.

6. Returning to the original numbers, please take the weighted average cost of capital for this project up to 10.5% and down to 9.5% (up by 5% and down by 5%) and record the new net present value numbers.

7. From the answer to the prior six problems using the resulting range of outcome after making the 5% changes to the variables, which variable has the greatest influence on the net present value of this project?

0 1 2 3 4 5 6 7 8 (800,000) 2 Years 3 Acquisition stage cash flow: 4 Initial Outlay 5 6 Operating stage cash flow: 7 Sales 8 Fixed Cost 9 Variable Cost 10 Depreciation expense 11 Taxable income 12 Taxes 13 After tax income 14 Add back depreciation 15 Operating cash flows 16 17 Disposition stage cash flow: 18 19 Total cash flow 20 Present Value 21 Net Present Value 600,000 600,000 600,000 600,000 (220,000) (220,000) (220,000) (220,000) (240,000) (240,000) (240,000) (240,000) (68,000) (68,000) (68,000) (68,000) 72,000 72,000 72,000 72,000 (20,160) (20,160) (20,160) (20,160) 51,840 51,840 51,840 51,840 68,000 68,000 68,000 68,000 119,840 119,840 119,840 119,840 600,000 600,000 600,000 600,000 (220,000) (220,000) (220,000) (220,000) (240,000) (240,000) (240,000) (240,000) (68,000) (68,000) (68,000) (68,000) 72,000 72,000 72,000 72,000 (20,160) (20,160) (20,160) (20,160) 51,840 51,840 51,840 51,840 68,000 68,000 68,000 68,000 119,840 119,840 119,840 119,840 500,000 119,840 119,840 119,840 119,840 119,840 119,840 119,840 619,840 (800,000) 872,591 72,591 0 1 2 3 4 5 6 7 8 (800,000) 2 Years 3 Acquisition stage cash flow: 4 Initial Outlay 5 6 Operating stage cash flow: 7 Sales 8 Fixed Cost 9 Variable Cost 10 Depreciation expense 11 Taxable income 12 Taxes 13 After tax income 14 Add back depreciation 15 Operating cash flows 16 17 Disposition stage cash flow: 18 19 Total cash flow 20 Present Value 21 Net Present Value 600,000 600,000 600,000 600,000 (220,000) (220,000) (220,000) (220,000) (240,000) (240,000) (240,000) (240,000) (68,000) (68,000) (68,000) (68,000) 72,000 72,000 72,000 72,000 (20,160) (20,160) (20,160) (20,160) 51,840 51,840 51,840 51,840 68,000 68,000 68,000 68,000 119,840 119,840 119,840 119,840 600,000 600,000 600,000 600,000 (220,000) (220,000) (220,000) (220,000) (240,000) (240,000) (240,000) (240,000) (68,000) (68,000) (68,000) (68,000) 72,000 72,000 72,000 72,000 (20,160) (20,160) (20,160) (20,160) 51,840 51,840 51,840 51,840 68,000 68,000 68,000 68,000 119,840 119,840 119,840 119,840 500,000 119,840 119,840 119,840 119,840 119,840 119,840 119,840 619,840 (800,000) 872,591 72,591