Question
The spreadsheet Table 6.2, presents a base case scenario. You will have to use it to construct 4 additional scenarios, two better and two worse.
The spreadsheet Table 6.2, presents a base case scenario. You will have to use it to construct 4 additional scenarios, two better and two worse. In the better scenarios your revenue will increase each time in an increment as below compared to the base case, the working capital will decrease each time in increments as below and your sale price of the old equipment will increase each time in increments as below. All the other numbers will be the same as in the base case scenario. In the worst cases, the cost of goods sold will increase each time in increments as below and the working capital will increase each in increments as below. All the other numbers will stay as in the base case scenario. For example is your revenue increase increment is 5% in the first better scenario you will increase revenue by 5% and in the second (the best scenario) by 10% compared to the base case. In all other instances the same logic will apply. Once you obtained the NPV of all the 5 scenarios you will have to determine using a normal distribution assumption (see helpful materials posted) the expected NPV and its standard deviation (use the excel functions.) Assuming that each scenario is equally likely, determine the ranges and probabilities for plus, minus one standard deviation and for two plus minus standard deviations around the mean You will write a short memo with your findings (add an excel sheet) and have the memo and all five worksheets (one for each scenario) in the excel workbook that would be submitted by the deadline.
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