Your team has identified several key aspects for the project. The following table shows the base-case...

 

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Your team has identified several key aspects for the project. The following table shows the base-case assumptions, together with the best case and worst case. Parameter Worst Case First-year sales (as a percentage of the total revenues in the latest reporting period) Revenue growth rate Project's EBITDA/Sales profit margin Net Working Capital Beta Initial Assumption 7% 15% for the second year, 10% for the third, and 5% annually for the final two years Similar to existing projects $25,000,000 The estimated beta 4% Constant after the first year at a rate of 0% +5% to the initial assumption $35,000,000 The upper bound of 95% confidence interval Best case 10% Constant after the first year at a rate of 15% -5% to the initial assumption $15,000,000 The lower bound of the 95% confidence interval (a) Perform break-even analysis with respect to the first-year sales parameter. (b) Perform sensitivity analysis for each parameter. Evaluate which parameter is the most important to the project. Your team has identified several key aspects for the project. The following table shows the base-case assumptions, together with the best case and worst case. Parameter Worst Case First-year sales (as a percentage of the total revenues in the latest reporting period) Revenue growth rate Project's EBITDA/Sales profit margin Net Working Capital Beta Initial Assumption 7% 15% for the second year, 10% for the third, and 5% annually for the final two years Similar to existing projects $25,000,000 The estimated beta 4% Constant after the first year at a rate of 0% +5% to the initial assumption $35,000,000 The upper bound of 95% confidence interval Best case 10% Constant after the first year at a rate of 15% -5% to the initial assumption $15,000,000 The lower bound of the 95% confidence interval (a) Perform break-even analysis with respect to the first-year sales parameter. (b) Perform sensitivity analysis for each parameter. Evaluate which parameter is the most important to the project.

Answer rating: 100% (QA)

a Performing breakeven analysis with respect to the firstyear sales parameter To perform a breakeven analysis we need to determine the number of units that must be sold to cover the initial investment ... View the full answer