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The management team for Beach Park Resort is leaning toward choosing Location B. The estimated cash flows based on the information availablenow are as follows:
The management team for Beach Park Resort is leaning toward choosing Location B. The estimated cash flows based on the information availablenow are as follows: Description Initial Cost Annual Operating & Maintenance Costs Annual Benefits Salvage Value Project Life Location B $64,000,000 $6,700,000/yr $7,000,000/yr $6,500,000 10 years The company uses a MARR of 10%. Do a sensitivity analysis to find the most sensitive variable by following these steps: a) [4pt] Calculate the PW of this base case. b) [6pt] Calculate the PW by varying the annual benefits +10%. c) [6pt] Calculate the PW by varying the salvage value +15%. d) [4pt] Prepare a sensitivity graph to show the change in PW based on the variation in these two variables. e) [2pt] Identify which variable is more important and needs more precise estimation
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