Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please use excel to solve and show the formulas used. 4 Consider the following cash flow for an investment: Year 0 1 2 3 5
Please use excel to solve and show the formulas used.
4 Consider the following cash flow for an investment: Year 0 1 2 3 5 6 L = 10,000 C=-15,000 C=-10,000 I=9,000 I=9,000 1=9,000 1=9,000 1=9,000 1=9,000 E = 15,000 C: Investment Costs, I: Income, L: Salvage Value, E: Environmental Remediation Cost For a minimum ROR (i*) of 7.50%, evaluate the sensitivity of the project's NPV using Sensitivity Analysis (OVAT Analysis). The range of the input data are: a) Year 0 Cost (+/- 5%): i.e., -$14,250,-$15,000, and -$15,750 b) Year 1 Cost (+/- 10%) for year 1 cost: i.e., -$9,000,-$10,000, and -$11,000 c) Incomes (+/-15%): i.e., $7,650, $9,000, and $10,350 d) Salvage value (+/-20%): i.e., $8,000, $10,000, and $12,000 e) Environmental Cost (+/- 20%), i.e., -$12,000,-$15,000, and -$18,000 f) Plot the tornado diagram with respect to the results from Parts a) through e) g) Rank the five uncertain inputs (two escalation rates, initial investment, salvage value, and remediation cost) based on the NPV sensitivity analysis 4 Consider the following cash flow for an investment: Year 0 1 2 3 5 6 L = 10,000 C=-15,000 C=-10,000 I=9,000 I=9,000 1=9,000 1=9,000 1=9,000 1=9,000 E = 15,000 C: Investment Costs, I: Income, L: Salvage Value, E: Environmental Remediation Cost For a minimum ROR (i*) of 7.50%, evaluate the sensitivity of the project's NPV using Sensitivity Analysis (OVAT Analysis). The range of the input data are: a) Year 0 Cost (+/- 5%): i.e., -$14,250,-$15,000, and -$15,750 b) Year 1 Cost (+/- 10%) for year 1 cost: i.e., -$9,000,-$10,000, and -$11,000 c) Incomes (+/-15%): i.e., $7,650, $9,000, and $10,350 d) Salvage value (+/-20%): i.e., $8,000, $10,000, and $12,000 e) Environmental Cost (+/- 20%), i.e., -$12,000,-$15,000, and -$18,000 f) Plot the tornado diagram with respect to the results from Parts a) through e) g) Rank the five uncertain inputs (two escalation rates, initial investment, salvage value, and remediation cost) based on the NPV sensitivity analysis
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started