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Question 1: Consider the following cash flow for an investment: Year 0 1 2 3 4 5 6 L = 50,000 |C=100,000|| |=25,000|1=25,000 1=25,000|1=25,000|1=25,000|| 1-25,000
Question 1: Consider the following cash flow for an investment: Year 0 1 2 3 4 5 6 L = 50,000 |C=100,000|| |=25,000|1=25,000 1=25,000|1=25,000|1=25,000|| 1-25,000 C: Cost, I: Income, L: Salvage Value Assume the 10% minimum rate of return (discount rate) and evaluate the sensitivity of the project NPV to 25% and 50% increase and decrease in: 1. Initial investment 2. Annual income 3. Salvage value 4. Interest rate 5. Draw the tornado graph and rank above 4 inputs based on NPV sensitivity analysis
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