4-3

projects Ontario should accept. Problem 4-3 (Advanced Topics-Sensitivity Analysis) Orange County Inc. has a 6% cost of capital. The firm decides to invest in equipment that costs $250,000. Orange County, Inc. forecasts that the project will generate $33,000 of annual cash inflow in each of the next eleven years. Orange County Inc also presents the following present value of l table factors for a 6% interest rate for time periods 1-11: Period Table Factor 94340 1.83339 2.67301 3.46511 4.21236 4.91732 5.58238 6.20979 6.80169 7.36009 7.88687 10 Required: Using Excel formulas, compute the project's net present value. State the reason why Orange County Inc. should make or not make the investment. .Use sensitivity analysis to determine: a. b. c. The maximum hurdle rate that could exist before Orange County Inc. rejects the investment. The minimum annual cash flow that Orange County could generate and still invest in the project. The minimum number of years that Orange County could generate a $33,000 annuity and still invest in the project