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Sensitivity Analysis of NPV

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Sensitivity Analysis is an analysis of a change in NPV when a key input variable is changed and all other variables stay the same.

Key variables can change a NPV (return) of a project. The graphing of this data indicates the degree of risk of each variable to the analysis.

Take the information and analysis presented in the attached excel file. Look at the Base Case and present a sensitivity analysis with the following variables and inputs:
% change variables: +25%,+20%,+15%,+10%, +5%, 0%
(Base Case), -5%, -10%,-15%,-20%, -25%

Sensitivity variables:
1). Selling Price per Unit
2). Variable Cost Per Unit
3). Salvage Value
4). WACC

a) Include a spreadsheet file with the analysis,
b) including a graph of the sensitivity/NPV review.
c) Along with a brief written review of what this analysis tells you about the project.

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Sensitivity Analysis of the Project
On the basis of sensitivity analysis, it is identified that there is a significant impact of changing sales price per unit on NPV of the project. When sales price per unit increases, ...

Solution Summary

This response presents a sensitivity analysis of Selling Price per Unit, Variable Cost Per Unit, Salvage Value and WACC.

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Sensitivity Analysis NPV Question

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Sensitivity Analysis NPV Question

A project has an initial investment of $200.00. You have come up with the following estimates of the projects with cash flows.

Pessimistic NPV Most Likely Optimistic
Revenues 30 40 50
Costs -20 -16 -10

If the cash flows are perpetuities and the cost of capital is 10%. What does a sensitivity analysis of NPV (no taxes) show? Please show step-by-step computations. Thanks!

BTW. As you are probably well aware, there is an answer for each (Pessimistic, Most Likely and Optimistic).

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