The forecasts in Exhibits 5.27, 5.28, and 5.29 are available on D2L as an Excel spreadsheet. Use the spreadsheet to answer the following questions:

Even if Mass Stoves original forecast assumptions are an acceptable most likely scenario, its possible that something will not go as planned. Conduct sensitivity analysis by changing key forecast assumptions to be consistent with the following scenarios and describe what would happen under each scenario (i.e., to what extent would Mass Stove be able to operate). Treat each scenario as independent of the others. Change the appropriate assumption and then revert to the original assumption before moving to the next scenario.

1. What happens to Mass Stoves cash balance if sales growth in Year 12 and Year 13 is 30%? Will Mass Stove be able to repay the loan? Why or why not?

2. What happens if sales growth in Year 12 and Year 13 is 20%? Why does your answer differ from a. above?

3. What happens if cost of goods sold as a percent of sales in Year 12 and Year 13 remains at the Year 11 level of 54%?

4. What happens if legal fees are $60,000 in Year 12 instead of $45,000? Hint: be sure that when you change the amount of legal fees in your assumptions that it is correctly linked back into your financial statements.

5. Would your team make a loan to Mass Stove? Why or why not?