Question: 3-5 Project Risk AnalysisSensitivity Analysis Refer to the HMG example found in Problem 2-11 (page 52) and answer the following questions: What are the key

3-5 Project Risk AnalysisSensitivity Analysis Refer to the HMG example found in Problem 2-11 (page 52) and answer the following questions:

What are the key sources of risk that you see in this project?

Use the Goal Seek function in Excel to find the breakeven values (i.e., values that force the project NPV to equal zero) for each of the following variables: the initial CAPEX, the working capital percentage of revenue growth, variable cost percentage of sales, and sales volume. (Hint: Scale the sales volume for all five years up and down by the same percentage.)

Which of the variables analyzed in Problem 3-5(b) do you think is the greatest source of concern? What, if anything, could you do to reduce the risk of the project?

Should you always seek to reduce project risk?

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