For your Final Project, use the following simplified cash-flow: showing a capital cost of $220k and
$60k in revenues from year 1 to 5. There is also a $70k salvage value at the endo of the project in
year 5.
Capital Cost $70,000 Salvage Value
-220,000 $60,000 $60,000 $60,000 $60,000 $60,000 Profits
0 1 2 3 4 5 years
To calculate the following:
1. The NPV of the total project at 8% yearly interest rate.
2. The IRR of the project, if the minimal attractive rate of return is 12%, would you invest in this
project? _______ (do not forget to add the salvage value in your calculations)
3. What is the Max Capital Exposure (MCE) of this project, make a graph as done in your
previous quiz to illustrating the MCE
4. Find the Present Value Ratio of this project? What is the Benefit Cost Ratio (B/C)?
5. Find the GROR (MARR in excel) as if you would like to compare it with a project that will last 10
years. Use a 6% re-finance rate.
Sensitivity Analysis: Make sure you have read the class notes within this ANGEL folder on how to
perform a sensitivity analysis and how to create a star-sensitivity graph. For each question below
make a table to keep track of your results and to graph the change of the NPV values for each
case.
6. Re-calculate the NPV using the above cash-flow when the Capital-Cost of 220k is changed –
40% (220k *0.4 = 88k), -30% -20%, -%10, 0 (no change), 10%, 20%, 30%, 40%. (Graph your
results using the xy scatter graph in excel and combine the graph with the graphs below to create
a star-graph as seen in class notes)
7. Re-calculate the NPV using the above cash-flow when the Revenue of 60k is changed -40%
(60k *0.4 = 24k), -30% -20%, -%10, 0 (no change), 10%, 20%, 30%, 40%. Graph your results
using the xy scatter graph in excel
8. Re-calculate the NPV using the above cash-flow when the Salvage Value of 70k is changed –
40% (70k *0.4 = 28k), -30% -20%, -%10, 0 (no change), 10%, 20%, 30%, 40%. Graph your
results using the xy scatter graph in excel
9. Based on your graphs above, determine which of the Capital Cost, Revenue or Salvage Value
are the most and less sensitive. Rank the 3 factors from high sensitivity to less sensitivity.
10. If you were the manager or COO of this company what would be your conclusions when
assigning personnel and resources to this project?
