Sensitivity analysis: San Lucas Corporation

San Lucas Corporation is considering investment in robotic machinery based upon the following estimates:

Cost of robotic

machinery $$4,000,000$

Residual value $$300,000$

Useful life $,10$ years

Net present value $

indicate a negative net present value.

c$.$ Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of $10\%.$ Round to the nearest dollar.

Annual Net Cash Flow $

d$.$ San Lucas Corporation wishes to invest in a robotics project. Based on the information from the above requirements, at what cash flow should San Lucas Corporation accept the project?

$($a$)$ If the net cash flow is $$700,000$

$($b$)$ If the net cash flow is $$900,000$

$($c$)$ If the net cash flow is $$500,000$

$($d$)$ Both $$700,000$ and $$900,000$ net cash flow.

In the above given situation identify the statement that supports San Lucas Corporation's decision of accepting $$700,000$ and $$900,000$ net cash flows.

$($a$)$ The net cash inflow is higher and in turn increases the profitability of the business.

$($b$)$ The net present value and the cash flows are positive.

$($c$)$ The net present value can be ignored and the decision is based on the net cash inflow.

$($d$)$ None of the above.