Using the spreadsheet provided, run the following sensitivities:
take sales up to $630,000 and down to $570,000 and record the new net present value numbers.
Returning to the original numbers, take disposition value up to $525,000 and down to $475,000 and record the new net present value numbers.
Returning to the original numbers, take variable costs up for all years to 42% and down to 38% and record the new net present value numbers.
Returning to the original numbers, take fixed costs up for all years to $231,000 and down to $209,000 and record the new net present value numbers.
Returning to the original numbers, take the tax rate to up to 29.4% and down to 26.6% and record the new net present value numbers.
Returning to the original numbers, take the weighted average cost of capital for this project up to 10.5% and down to 9.5% and record the new net present value numbers.
From the answer to the prior six problems using the resulting range of outcome after making the 5% changes to the variables, which variable has the greatest influence on the net present value of this project?
Going back to the prior two problems which of these alternatives is better for the company? The original method, the modification suggested in problem 8, or the modification in problem 9? Why?
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