B. Problem Statement You are the owner of a mushroom farm and are planning to ex

Question

B. Problem Statement You are the owner of a mushroom farm and are planning to expand your operation to meet the growing demand for mushrooms While you've done the necessary due diligence and are satisfied with the projected values of key project parameters (e.g., annual revenues and operating costs), you are not fully confident that your world will unfold exactly as projected Because of your lingering uncertainty, you've mandated a former classmate of yours to perform project. . m a one-way sensitivity analysis of your o The current "best guesses for project parameters are listed below: 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 (NP Parameters | -15% |-10%| -5% | Reference l +5% | +10% | +15% Scenario AOR AOC SV MARR

Explanation / Answer

4 Calculating NPV for DD cell Year cash flow PV factor PV 0 -495000 1 -495000.00 1 to 5 120000 3.7908 454894.41 5 45265 0.620921 28106.00 -11999.58 Annual cash inflows=300000-180000 Ans - (a) -12000 5 Calculating NPV for EE cell Year cash flow PV factor PV 0 -450000 1 -450000.00 1 to 5 75000 3.7908 284309.01 5 45265 0.620921 28106.00 -137584.99 Annual cash inflows=(300000 x 0.85)-180000 Ans - (a) -137600 6 Calculating NPV for FF cell Year cash flow PV factor PV 0 -450000 1 -450000.00 1 to 5 165000 3.7908 625479.82 5 45265 0.620921 28106.00 203585.82 Annual cash inflows=(300000 x 1.15)-180000 Ans - ( c) 203600 Please provide feedback… Thanks in Advance :-)

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