Question

Blooper’s analysts have come up with the following revised estimates for its magnoosium mine:

	Range
	Pessimistic				Optimistic
Initial investment	+	30	%		–	25	%
Revenues	–	25	%		+	20	%
Variable costs	+	25	%		–	15	%
Fixed cost	+	50	%		–	50	%
Working capital	+	30	%		–	45	%

Conduct a sensitivity analysis for each variable and range and compute the NPV for each. Use Spreadsheet 10.1 and accompanying data as a starting point for the analysis. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in thousands rounded to the nearest whole dollar.)

Excel File Edit Tools Data Window Help 35% D Fri 10:56 PM View Insert Format OUES оос AutoSave OFF Q Spreadsheet_10_1 Acrobat Tell me Home Insert Draw Page Layout Formulas View Share Comments Data Review = = = Insert v Calibri (Body) 11 ~ Å General Conditional Formatting Format as Table V DX Delete Pasta BIU OA $ % ) Editing Ideas Sensitivity Cell Styles Format v Create and Share Adobe PDF L16 A B C D E F G H 1 1 . K i M N o P Q R S S T 1 4 5 6 i 7 Initial revenues I thousands) Variable costs (% of revenues) Initial fixed costs (5 thousands! Inflation rate1% Discount rate(%) Receivables (% of sales) Inventory 1% of next year's costs] Tax rate(%) 15,000 40.0% 4,000 5.0% 12.0% 16.7% 15.0% 21.0% ! 1 Year: 0 1 2 3 4 5 6 10,000 B. Fixed assets Investments in fixed assets Sales of fixed assets Cash flow from fixed assets 1,580 1,500 1 -10,000 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 C. Operating cash flow Revenues Variable expenses Fixed expenses Depreciation Pretax profit Tax Profit after tax Operating cash flow 15,000 6,000 4,000 2.000 3,000 630 2,370 4,370 15,750 6,300 4,200 2,000 3,250 683 2,568 4,568 16,538 6,615 4,410 2,000 3,513 738 2,775 4,775 17,364 6,946 4,631 2,000 3,788 796 2,993 4,993 18,233 7,293 4,862 2.000 4,078 856 3,221 5,221 D. Working capital Working capital Change in working capital Cash flow from investment in working capital 1,500 1,500 -1,500 4,075 2,575 -2.575 0.406 4,279 204 -204 4,493 214 -214 0.408 4,717 225 -225 0.408 3,039 -1,679 1,679 0.250 0 -3,039 3,039 0.408 E. Project valuation Total project cash flow Sheet1 + 11,500 1,795 4,364 4,561 4.765 6,900 Select destination and press ENTER or choose Paste E- + 100% AR 18 o J AB W do x

Answer 1

revenue variable cost fixed cost 15000 60001 40001 0 1 2 2. 3 4 6 year investment in fixed assets terminal value - 10,000 NPV pessimistic optimistic initial investment +30%, -25% 3112.9 8612.99 Revenues -25%, +20% -890.44) 11715.75 Variable costs +25%, -15% 1444 8914.375 Fixed cost +50%, -50% -112.2 12338.28 Working capital +30%, -45% 5990.477 6907.107 1580 15000 -6000 -4000 -2000 revenue @ 5% inflation variable expenses fixed cost depreciation pretax profit tax @ 21% after tax profit operating cash flow 15750 16537.5 17364.38| 18232.59 -6300 -66151 -6945.75 -7293.04 -4200 -4410 -4630.50 -4862.03 -2000 -2000 -2000 -2000 3250 3512.5| 3788.125| 4077.531 -682.50 -737.6251 - 795.506 -856.282 2567.5 2774.875 2992.619 3221.25 4567.5| 4774.875/ 4992.619 5221.25 3000 -630 2370 4370 working capital cash flow cash flow present value @ 12% NPV -1500 -2575 -204 -214 -225 1679 3039 -11,5001 1,795 4,364 4,561 4,768 6,900 4,619 -11500 1602.679 3478.555 3246.341 3029.908) 3915.387 2340.129 6112.999

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