A. Inputs Initial investment ($ thousands) 10,000 Salvage value ($ thousands) 2,
ID: 2616424 • Letter: A
Question
A. Inputs Initial investment ($ thousands) 10,000 Salvage value ($ thousands) 2,000 Initial revenues ($ thousands) 15,000 Variable costs (% of revenues) 40.0% Initial fixed costs ($ thousands) 4,000 Initial total expenses ($ thousands) 10,000 Inflation rate (%) 5.0% Discount rate (%) 12.0% Receivables (% of sales) 16.7% Inventory (% of next year's costs) 15.0% Tax rate (%) 35.0% Year: 0 1 2 3 4 5 6 B. Fixed assets Investments in fixed assets 10,000 Sales of fixed assets 1,300 Cash flow from fixed assets -10,000 1,300 C. Operating cash flow Revenues 15,000 15,750 16,538 17,364 18,233 Variable expenses 6,000 6,300 6,615 6,946 7,293 Fixed expenses 4,000 4,200 4,410 4,631 4,862 Depreciation 2,000 2,000 2,000 2,000 2,000 Pretax profit 3,000 3,250 3,513 3,788 4,078 Tax 1,050 1,138 1,229 1,326 1,427 Profit after tax 1,950 2,113 2,283 2,462 2,650 Operating cash flow 3,950 4,113 4,283 4,462 4,650 D. Working capital Working capital 1,500 4,075 4,279 4,493 4,717 3,039 0 Change in working capital 1,500 2,575 204 214 225 -1,679 -3,039 Cash flow from investment in working capital -1,500 -2,575 -204 -214 -225 1,679 3,039 0.408 0.408 0.408 0.408 0.250 E. Project valuation Total project cash flow -11,500 1,375 3,909 4,069 4,238 6,329 4,339 Check my work Blooper's analysts have come up with the following revised estimates for its agnoosium mine: Range Pessimistic Optimistia Initial investment Revenues Variable costs Fixed cost Working capital 40% -20% + 20% + 50% + 358 -20% + 25% -158 -50% 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) Project NPV Pessimistic Expected Optimistic Initial investment Revenues Variable costs Fixed costs Working capital PrewExplanation / Answer
Pessimistic Expected Optimistic Initial Investment - 16,100 - 11,500 - 9,200 (-11500*140%) (-11500*80%) Discounting Factor 1 1 1 NPV - 16,100 - 11,500 - 9,200 Cashflows PV of Cashflows Revenues Pessimistic (-20%) Expected Optimistic (+25%) Discounting Factor @ 12% Pessimistic Expected Optimistic Year 1 12,000 15,000 18,750 0.89 10,714 13,393 16,741 Year 2 12,600 15,750 19,688 0.80 10,045 12,556 15,695 Year 3 13,230 16,538 20,673 0.71 9,417 11,771 14,714 Year 4 13,891 17,364 21,705 0.64 8,828 11,035 13,794 Year 5 14,586 18,233 22,791 0.57 8,277 10,346 12,932 NPV 47,281 59,101 73,876 Discounting factor = previous year factor / 1.12 Cashflows PV of Cashflows Variable Costs Pessimistic (+20%) Expected Optimistic (-15%) Discounting Factor @ 12% Pessimistic Expected Optimistic Year 1 7,200 6,000 5,100 0.89 6,429 5,357 4,554 Year 2 7,560 6,300 5,355 0.80 6,027 5,022 4,269 Year 3 7,938 6,615 5,623 0.71 5,650 4,708 4,002 Year 4 8,335 6,946 5,904 0.64 5,297 4,414 3,752 Year 5 8,752 7,293 6,199 0.57 4,966 4,138 3,518 NPV 28,369 23,640 20,094 Cashflows PV of Cashflows Fixed Cost Pessimistic (+50%) Expected Optimistic (-50%) Discounting Factor @ 12% Pessimistic Expected Optimistic Year 1 6,000 4,000 2,000 0.89 5,357 3,571 1,786 Year 2 6,300 4,200 2,100 0.80 5,022 3,348 1,674 Year 3 6,615 4,410 2,205 0.71 4,708 3,139 1,569 Year 4 6,947 4,631 2,316 0.64 4,415 2,943 1,472 Year 5 7,293 4,862 2,431 0.57 4,138 2,759 1,379 NPV 23,641 15,761 7,880 Cashflows PV of Cashflows Working Capital Pessimistic (+35%) Expected Optimistic (-35%) Discounting Factor @ 12% Pessimistic Expected Optimistic Year 0 2,025 1500 975 1 2,025 1,339 871 Year 1 3,476 2,575 1,674 0.89 3,104 2,299 1,494 Year 2 275 204 133 0.80 220 163 106 Year 3 289 214 139 0.71 206 152 99 Year 4 304 225 146 0.64 193 143 93 Year 5 - 2,267 - 1,679 - 1,091 0.57 - 1,286 - 953 - 619 Year 6 - 4,103 - 3,039 - 1,975 0.51 - 2,079 - 1,540 - 1,001 NPV 2,382 1,604 1,043
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.