You are considering buying a corner snow cone business for $100,000. As a conservative business person, you assume zero salvage value at the end of the project. You assume annual sales of 12,000 snow cones per year. The price of a snow cone in year 1 is $5.00/ea. (You make exceptionally good snow cones!!!) Operating costs are estimated to be $8,000/yr. 

The project evaluation life is 3 years, and the minimum rate of return is 15%. 

(a)  Conduct a single-variable sensitivity analysis of the project, looking specifically at the net present value and rate of return. Assume there is potential variation in the capital cost of 15%. Depending on the weather, your annual sales may vary by as much as 10% and operating costs as much as 7%. 

(b)  Summarize your results using tornado charts. 

(c)  What is the best and worst case?rn

Answer rating: 100% (QA)

a 1 2 3 Price P 500 500 500 Quantity Q 12000 12000 12000 Total RevenuesPQ 60000 60000 60000 Operatin... View the full answer