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    Calculating Negative Predictive Value (Statistics)

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    Modify Acron's model (Excel filed attached) so that development lasts for an extra year. Specifically, assume that development costs of $7.2 million and $2.1 million are incurred at the beginnings of years 1 and 2, and then the sales in the current model occur one year later, that is from year two until year 21. Again, calculate the negative predictive value (NPV) discounted back to the beginning of year 1, and perform the same sensitivity analyses. What are some of the effects of this change in timing?

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    Solution Preview

    Attached to this answer, you will find the modified Excel sheet you need. I made the following changes:

    - Define range names "Development_cost_Y1" and "Development_cost_Y2", in order to separate the development costs that are incurred in the first year (Y1) and in the second one (Y2)

    - Move the cash flows one ...

    Solution Summary

    This solution includes explanations and calculations for a negative predictive value and same sensitivity analyses.