Spreadsheet 10.1

A. Inputs Initial investment ($ thousands) 10,000 Salvage value ($ thousands) 2,000 Initial revenues ($ thousands) 15,000 Variable costs (% of revenues) 40.0% Initial fixed costs ($ thousands) 4,000 Inflation rate (%) 5.0% Discount rate (%) 12.0% Receivables (% of sales) 16.7% Inventory (% of next year's costs) 15.0% Tax rate (%) 21.0% Year: 0 1 2 3 4 5 6 B. Fixed assets Investments in fixed assets 10,000 Sales of fixed assets 1,580 Cash flow from fixed assets -10,000 1,580 C. Operating cash flow Revenues 15,000 15,750 16,538 17,364 18,233 Variable expenses 6,000 6,300 6,615 6,946 7,293 Fixed expenses 4,000 4,200 4,410 4,631 4,862 Depreciation 2,000 2,000 2,000 2,000 2,000 Pretax profit 3,000 3,250 3,513 3,788 4,078 Tax 630 683 738 796 856 Profit after tax 2,370 2,568 2,775 2,993 3,221 Operating cash flow 4,370 4,568 4,775 4,993 5,221 D. Working capital Working capital 1,500 4,075 4,279 4,493 4,717 3,039 0 Change in working capital 1,500 2,575 204 214 225 -1,679 -3,039 Cash flow from investment in working capital -1,500 -2,575 -204 -214 -225 1,679 3,039 0.408 0.408 0.408 0.408 0.250 E. Project valuation Total project cash flow -11,500 1,795 4,364 4,561 4,768 6,900 4,619 Discount factor 1.000 0.893 0.797 0.712 0.636 0.567 0.507 PV of cash flow -11,500 1,603 3,479 3,246 3,030 3,915 2,340 Net present value 6,113.1

Blooper's analysts have come up with the following revised estimates for its magnoosium mine: Initial investment Revenues Variable costs Fixed cost Working capital Range Pessimistic Optimistic + 40% - 25% 25% + 20% + 20% - 20% + 35% - 35% + 30% - 35% Conduct a sensitivity analysis for each variable and range and compute the NPV for each. Use Spreadsheet 10.1 and accompanying data as a starting point for the analysis. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in thousands rounded to the nearest whole dollar.) Project NPV Expected Pessimistic Optimistic Initial investment Revenues Variable costs Fixed costs Working capital Blooper's analysts have come up with the following revised estimates for its magnoosium mine: Initial investment Revenues Variable costs Fixed cost Working capital Range Pessimistic Optimistic + 40% - 25% 25% + 20% + 20% - 20% + 35% - 35% + 30% - 35% Conduct a sensitivity analysis for each variable and range and compute the NPV for each. Use Spreadsheet 10.1 and accompanying data as a starting point for the analysis. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in thousands rounded to the nearest whole dollar.) Project NPV Expected Pessimistic Optimistic Initial investment Revenues Variable costs Fixed costs Working capital