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The managers of a company are considering an investment with the following estimated cash flows. MARR is 15% per year. The company is inclined to make the investment; however, the managers are nervous because all of the cash flows and the useful life are approximate values. The capital investment is known to be within 15%. Annual expenses are known to be within 10%. The annual revenue, market value, and useful life estimates are known to be within + 20% a. Analyze the sensitivity of PW to changes in each estimate individually. Based on your results, make a recommendation regarding whether or not they should proceed with this project Graph your results for presentation to management. b. The company can perform market research and/or collect more data to improve the accuracy of these estimates. Rank these variables by ordering them in accordance with the need for more accurate estimates (from highest need to lowest need). Click the icon to view the interest and annuity table for discrete compounding when the MARR is 15% per year. a. Calculate the PW value for the initial amounts. Capital investment $30,000 Annual revenues $20,000 Annual expenses $5,000 Market value $1,000 Useful life 5 years PW(15%) = (Round to the nearest hundreds.) Analyze the sensitivity of PW to changes in each estimate individually. (Round PW values to the nearest hundreds and breakeven percent change to one decimal place.) Factor PW Breakeven percent change Capital Investment %6 Annual expenses 96 Factor Change - 5% $ + 5% $ - 10% S -10% $ - 2096 $ + 20% $ -20% $ + 20% $ -20% $ + 20% $ Annual revenue 96 Market value 96 Useful life 96 The managers of the company (1) proceed with this project Graph your results for presentation to the management. . Use the line drawing tool to plot the lines that represent the PW value for each factor. Use the range from - 40% to 40% change for your plot Be sure to properly label your lines. Q 50000 40000 30000 20000 Prin 07 -1000604020 20 40 60 80 100 Percent Devation Changes from Most Likely Estimate b. Rank these variables by ordering them in accordance with the need for more accurate estimates (from highest need to lowest need). (2 (3 (5) (6) 1: More Info Capital Recovery Factor To Find A Given P AIP N N 1 2 3 4 5 6 7 8 9 10 Discrete Compounding; i = 15% Single Payment Uniform Series Compound Compound Sinking Amount Present Amount Present Fund Factor Worth Factor Factor Worth Factor Factor To Find F To Find P To Find F To Find P To Find A Given P Given F Given A Given A Given F FIP PIF FIA PIA AIF 1.1500 0.8696 1.0000 0.8696 1.0000 1.3225 0.7561 2.1500 1.8257 0.4651 1.5209 0.6575 3.4725 2.2832 0.2880 1.7490 0.5718 4.9934 2.8550 0.2008 2.0114 0.4972 6.7424 3.3522 0.1483 2.3131 0.4323 8.7537 3.7845 0.1142 2.8600 0.3750 11.0888 4.1604 0.0004 3.0590 0.3289 13.7268 4.4873 0.0729 3.5179 0.2843 16.7858 4.7716 0.0596 4.0458 0.2472 20.3037 5.0188 0.0403 4.8524 0.2149 24.3493 5.2337 0.0411 5.3503 0.1889 29.0017 5.4206 0.0345 6.1528 0.1625 34.3519 5.5831 0.0291 7.0757 0.1413 40.5047 5.7245 0.0247 8.1371 0.1229 47.5804 5.8474 0.0210 9.3578 0.1069 55.7175 5.9542 0.0179 10.7613 0.0929 65.0751 6.0472 0.0154 12.3756 0.0808 75.8384 6.1280 0.0132 14.2318 0.0703 88.2118 6. 1982 0.0113 16.3665 0.0611 102.4430 6.2593 0.0098 18.8215 0.0531 118.8101 6.3125 0.0084 21.6447 0.0462 137.6316 6.3587 0.0073 24.8915 0.0402 159.2784 6.3988 0.0083 28.6252 0.0349 184.1878 6.4338 0.0054 32.9190 0.0304 212.7930 6.4641 0.0047 11 12 13 14 15 1.1500 0.8151 0.4380 0.3503 0.2983 0.2842 0.2404 0.2229 0.2096 0.1993 0.1911 0.1845 0.1791 0.1747 0.1710 0.1679 0.1654 0.1632 0.1613 0.1598 0.1584 0.1573 0.1583 0.1554 0.1547 16 17 18 19 20 21 22 23 24 25 (1) O should not O should O Annual Expenses O Capital Investment Annual Revenues Annual Revenues (2) O Annual Revenues O Capital Investment Useful Life O Market Value 0000 (3) O Useful Life O Annual Expenses O Market Value O Annual Revenues (4) O Useful Life O Annual Expenses O Market Value Capital Investment (5) O Capital Investment Market Value O Annual Expenses O Useful Life O Annual Revenues (6) O Market Value O Capital Investment O Useful Life O Annual Expenses The managers of a company are considering an investment with the following estimated cash flows. MARR is 15% per year. The company is inclined to make the investment; however, the managers are nervous because all of the cash flows and the useful life are approximate values. The capital investment is known to be within 15%. Annual expenses are known to be within 10%. The annual revenue, market value, and useful life estimates are known to be within + 20% a. Analyze the sensitivity of PW to changes in each estimate individually. Based on your results, make a recommendation regarding whether or not they should proceed with this project Graph your results for presentation to management. b. The company can perform market research and/or collect more data to improve the accuracy of these estimates. Rank these variables by ordering them in accordance with the need for more accurate estimates (from highest need to lowest need). Click the icon to view the interest and annuity table for discrete compounding when the MARR is 15% per year. a. Calculate the PW value for the initial amounts. Capital investment $30,000 Annual revenues $20,000 Annual expenses $5,000 Market value $1,000 Useful life 5 years PW(15%) = (Round to the nearest hundreds.) Analyze the sensitivity of PW to changes in each estimate individually. (Round PW values to the nearest hundreds and breakeven percent change to one decimal place.) Factor PW Breakeven percent change Capital Investment %6 Annual expenses 96 Factor Change - 5% $ + 5% $ - 10% S -10% $ - 2096 $ + 20% $ -20% $ + 20% $ -20% $ + 20% $ Annual revenue 96 Market value 96 Useful life 96 The managers of the company (1) proceed with this project Graph your results for presentation to the management. . Use the line drawing tool to plot the lines that represent the PW value for each factor. Use the range from - 40% to 40% change for your plot Be sure to properly label your lines. Q 50000 40000 30000 20000 Prin 07 -1000604020 20 40 60 80 100 Percent Devation Changes from Most Likely Estimate b. Rank these variables by ordering them in accordance with the need for more accurate estimates (from highest need to lowest need). (2 (3 (5) (6) 1: More Info Capital Recovery Factor To Find A Given P AIP N N 1 2 3 4 5 6 7 8 9 10 Discrete Compounding; i = 15% Single Payment Uniform Series Compound Compound Sinking Amount Present Amount Present Fund Factor Worth Factor Factor Worth Factor Factor To Find F To Find P To Find F To Find P To Find A Given P Given F Given A Given A Given F FIP PIF FIA PIA AIF 1.1500 0.8696 1.0000 0.8696 1.0000 1.3225 0.7561 2.1500 1.8257 0.4651 1.5209 0.6575 3.4725 2.2832 0.2880 1.7490 0.5718 4.9934 2.8550 0.2008 2.0114 0.4972 6.7424 3.3522 0.1483 2.3131 0.4323 8.7537 3.7845 0.1142 2.8600 0.3750 11.0888 4.1604 0.0004 3.0590 0.3289 13.7268 4.4873 0.0729 3.5179 0.2843 16.7858 4.7716 0.0596 4.0458 0.2472 20.3037 5.0188 0.0403 4.8524 0.2149 24.3493 5.2337 0.0411 5.3503 0.1889 29.0017 5.4206 0.0345 6.1528 0.1625 34.3519 5.5831 0.0291 7.0757 0.1413 40.5047 5.7245 0.0247 8.1371 0.1229 47.5804 5.8474 0.0210 9.3578 0.1069 55.7175 5.9542 0.0179 10.7613 0.0929 65.0751 6.0472 0.0154 12.3756 0.0808 75.8384 6.1280 0.0132 14.2318 0.0703 88.2118 6. 1982 0.0113 16.3665 0.0611 102.4430 6.2593 0.0098 18.8215 0.0531 118.8101 6.3125 0.0084 21.6447 0.0462 137.6316 6.3587 0.0073 24.8915 0.0402 159.2784 6.3988 0.0083 28.6252 0.0349 184.1878 6.4338 0.0054 32.9190 0.0304 212.7930 6.4641 0.0047 11 12 13 14 15 1.1500 0.8151 0.4380 0.3503 0.2983 0.2842 0.2404 0.2229 0.2096 0.1993 0.1911 0.1845 0.1791 0.1747 0.1710 0.1679 0.1654 0.1632 0.1613 0.1598 0.1584 0.1573 0.1583 0.1554 0.1547 16 17 18 19 20 21 22 23 24 25 (1) O should not O should O Annual Expenses O Capital Investment Annual Revenues Annual Revenues (2) O Annual Revenues O Capital Investment Useful Life O Market Value 0000 (3) O Useful Life O Annual Expenses O Market Value O Annual Revenues (4) O Useful Life O Annual Expenses O Market Value Capital Investment (5) O Capital Investment Market Value O Annual Expenses O Useful Life O Annual Revenues (6) O Market Value O Capital Investment O Useful Life O Annual Expenses
