Please show how to do a sensitivity analysis based on revenue and sales to show how they will affect the NPV, IRR, and payback period. All calculations are included below.
Year 0 Year 1 Year 2 Year 3 Source $ 350.0 $ $ 402.5 15% 18% Persistence Assumptions ($ millions) Hiking/Walking market Growth of market Market share Var Costs (% of Sales) SG&A Expenses (% of sales) Other advertising and promotion Tax rate Purchase of technology Equipment costs Inventory & A/R A/P 15% 38% 12% 462.9 15% 20% 38% 8% 38% 10% 2.0 $ 3.0 $ $ 2.0 Case p.4, #3 Case p.4, #3 Case p.4, #3 Case p.4, #7 Case p.4, #9 Case p.4, #10 Case p.4, #11 Case p.4, #12 Case p.4, #5 Case p.4, #6 Case p.4, #6 40% 50.0 8.0 $ $ $ $ 25.0 10.0 Calculation Year 0 Year 1 Year 2 Year 3 Persistence Projected Cash Flow Statements ($ millions) Revenues $ 52.0 $ 72.5 $ 92.6 Var Costs $ (20.0) $ (27.5) $ (35.2) G & A Expenses $ (6.3) (7.2) $ (7.4) Advertising and Promotion $ (3.0) $ (2.0) $ (2.0) Equipment Depreciation (5 years MACRS) $ (1.6) $ (2.6) $ (1.5) Technology Purchase $ (50.0) $ EBIT $ (50.0) $ 21.7 $ 33.1 $ 46.5 Taxes $ 20.0 $ (8.7) $ (13.2) $ (18.6) EBIAT $ (30.0) $ 13.0 $ 19.9 $ 27.9 Plus Depreciation of Equipment $ 1.6 $ 2.6 $ 1.5 Change in NWC $ (15.0) $ $ $ 15.0 Change in Fixed Assets $ (8.0) Project Net Cash Flows $ (53.0) $ 14.6 $ 22.4 S 46.7 Cumulative Net Cash Flows $ (53.0) $ (38.4) $ (16.0) $ 30.7 Market share x market size Revenue x Var Cost % Revenue x % Line 7 Line 8 10 million x Depreciation % Pre tax cost Subtotal Tax impact Subtotal Machinery sold for book value Total Persistence Project Project Analysis: Assumed Cost of Capital Payback Net Present Value IRR 0.14 2.34 years $ 8.59 21.80% Year 0 Year 1 Year 2 Year 3 Source $ 350.0 $ $ 402.5 15% 18% Persistence Assumptions ($ millions) Hiking/Walking market Growth of market Market share Var Costs (% of Sales) SG&A Expenses (% of sales) Other advertising and promotion Tax rate Purchase of technology Equipment costs Inventory & A/R A/P 15% 38% 12% 462.9 15% 20% 38% 8% 38% 10% 2.0 $ 3.0 $ $ 2.0 Case p.4, #3 Case p.4, #3 Case p.4, #3 Case p.4, #7 Case p.4, #9 Case p.4, #10 Case p.4, #11 Case p.4, #12 Case p.4, #5 Case p.4, #6 Case p.4, #6 40% 50.0 8.0 $ $ $ $ 25.0 10.0 Calculation Year 0 Year 1 Year 2 Year 3 Persistence Projected Cash Flow Statements ($ millions) Revenues $ 52.0 $ 72.5 $ 92.6 Var Costs $ (20.0) $ (27.5) $ (35.2) G & A Expenses $ (6.3) (7.2) $ (7.4) Advertising and Promotion $ (3.0) $ (2.0) $ (2.0) Equipment Depreciation (5 years MACRS) $ (1.6) $ (2.6) $ (1.5) Technology Purchase $ (50.0) $ EBIT $ (50.0) $ 21.7 $ 33.1 $ 46.5 Taxes $ 20.0 $ (8.7) $ (13.2) $ (18.6) EBIAT $ (30.0) $ 13.0 $ 19.9 $ 27.9 Plus Depreciation of Equipment $ 1.6 $ 2.6 $ 1.5 Change in NWC $ (15.0) $ $ $ 15.0 Change in Fixed Assets $ (8.0) Project Net Cash Flows $ (53.0) $ 14.6 $ 22.4 S 46.7 Cumulative Net Cash Flows $ (53.0) $ (38.4) $ (16.0) $ 30.7 Market share x market size Revenue x Var Cost % Revenue x % Line 7 Line 8 10 million x Depreciation % Pre tax cost Subtotal Tax impact Subtotal Machinery sold for book value Total Persistence Project Project Analysis: Assumed Cost of Capital Payback Net Present Value IRR 0.14 2.34 years $ 8.59 21.80%
