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Please show how to do using excel inputs Thank you! The Rustic Welt Company is proposing to replace its old welt-making machinery with more modern
Please show how to do using excel inputs
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The Rustic Welt Company is proposing to replace its old welt-making machinery with more modern equipment. The new equipment costs \$9.2 million (the existing equipment has zero salvage value). The attraction of the new machinery is that it is expected to cut manufacturing costs from their current level of $8.20 a welt to $4.20. However, as the following table shows, there is some uncertainty about both the future sales and the performance of the new machinery: Conduct a sensitivity analysis of the replacement decision assuming a discount rate of 12%. Rustic does not pay taxes. Calculate the NPV. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Enter your answers in dollars not in millions. Negative amounts should be indicated by a minus sign. The most likely outcomes for a particular project are estimated as follows: However, you recognize that some of these estimates are subject to error. Suppose each variable turns out to be either 10% higher or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1.6 million, which will be depreciated straight-line over the project life to a final value of zero. The firm's tax rate is 21%, and the required rate of return is 12%. a. What is project's NPV in the best-case scenario, that is, assuming all variables take on the best possible value? b. What is project's NPV in the worst-case scenario? Note: For all the requirements, a negative amount should be indicated by a minus sign. Enter your answers in dollars, not in millions. Do not round intermediate calculations. Round your answers to the nearest dollar amountStep by Step Solution
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