Using Table 6.2 from page 161 in the book. Make whatever assumptions seem reasonable to you. What are the critical variables? Build a spreadsheet that you can use determine the NPV of the project as is and with the sensitivities that you create. 1 Capital investment and disposal 2 Change in working capital 3 Sales 4 Cost of goods sold 5 Other costs 6 Tax on income 7 Operating cash flow (3-4-5-6) 8 Net cash flow (1+2+7) Present value at 20% Net present value = 9 10 0 -10,000 1 0 -550 523 837 4,000 2,200 -1,400 -1,434 -2,600 -1,080 -12,600 -1,630 -12,600 -1,358 +3,520 (sum of 9) 0 0 2 0 -739 12,887 7,729 1,210 828 3,120 2,381 1,654 3 Period 0 -1,972 32,610 19,552 1,331 3,550 8,177 6,205 3,591 4 0 -1,629 48,901 29,345 1,464 5,778 12,314 10,685 5,153 5 0 1,307 35,834 21,492 1,611 3,902 8,829 10,136 4,074 6 0 1,581 19,717 11,830 1,772 1,586 4,529 6,110 2,046 >TABLE 6.2 IM&C's guano project-initial cash-flow analysis assuming straight-line depreciation ($ thousands). a Salvage value of $1,949 less tax of $507 on the difference between salvage value and ending book value. 7 1,442 2,002 0 0 0 3,444 961