Range Assume the project life is 12 years, the tax rate is 40%, the discount rat

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Range

Assume the project life is 12 years, the tax rate is 40%, the discount rate is 8%, and the depreciation method is straight-line over the project's life. Conduct a sensitivity analysis for each variable and range and compute the NPV for each. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Negative amounts should be indicated by a minus sign. Enter your answers in dollars, not in millions.)

  

NPV of Gravenstein Store

Finefodder’s analysts have come up with the following revised estimates for the Gravenstein store:

Explanation / Answer

Ans-

NPV of Gravenstein Store Pessimistic $ Expected $ Optimistic $ 1   Investment 5160000 5100000 5040000 2   Sales 11000000 15000000 17000000 3   Variable costs as % of sales 71 69 67 4 Variable cost 7810000 10350000 11390000 5 Contribution (1-4) 3190000 4650000 5610000 6 Fixed cost 2900000 2800000 2700000 7 Depreciation (1/12 years) 430000 425000 420000 8 Net cash flow(5-6-7) -140000 1425000 2490000 9 Tax @40% -56000 570000 996000 10 EAT(8-9) -196000 1995000 3486000 11 EAT + Depreciation 234000 2420000 3906000 12 PV @ 8% for 12 year 7.54 7.54 7.54 13 NPV     (11*12) 1764360 18246800 29451240

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