Can you help explain to me these two questions? 26. If the sensitivity Table for

Question

Can you help explain to me these two questions?

26. If the sensitivity Table for this assignment had been based on the External
Rate of Return (ERR) decision criterion instead of the Net Present Worth
(NPW) decision criterion, could your answer to question 15 be different?
a) Yes; b) No.
27. If the sensitivity Table for this assignment had been based on the
Discounted Payback Method decision criterion instead of the Net Present
Worth (NPW) decision criterion, could your answer to question 15 be
different?
a) Yes; b) No.

*****15. The most influential parameter on the project’s NPW in the -15% to +15%
range is a) P; b) AOR; c) AOC; d) SV; e) MARR. Answer to this question was A)*****

This is because the initial cost of project (P) is very crucial in calculating net present worth. This parameter help in determining what amount of revenues would be sufficient to for the acceptance of project. the cash outflow plays an important role to determine net present worth

I. Initial Cost (P) = $450,000 2. Salvage value (SV)= $45,265 3. Annual operating revenues (AOR) = $300,000 4. Annual operating costs (AOC)= $180,000 5. Economic life (N) = 5 years 6. MARR= 10% 7. Inflation Rate=0% One-way Sensitivity Table Net Present Worth (NPW Parameters -15% -10%| -5% | Reference l +5% +10% +15% Scenario AOR AOC SV MARR

Explanation / Answer

26)

No anwer wil remain the same as for ERR also,it is required to have the cash outflows to find the rate of return.

27)

As the decision makers are still interested in knowing when the initial cost P is paid back P plays an important role. However since this is a discounting criteria MARR also plays in important role in getting the discounted cash flows. No.

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