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

Question

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 a one-way sensitivity analysis of your project. The current "best" guesses for project parameters are listed below 1. 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%, +5% +10% +15% Reference Scenario AOR AOC SV MARR

Explanation / Answer

Just reduce the annual revanue by 15%.

Please provide feedback.....Thanks in advance..:-)

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

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