Based on your NPV Scenario / Risk Analysis Grids, is NPV more sensitive to changing cost of capital or changing salvage values? How do you determine this?

2 Yellow highlighted cells are cells for inputs. Team should verify all other calculations & formats 3C D E F G H I J K L M N O P Q R S T 4 Inputs 5 ATSV old @ t=0 305k ATSV formula = savage value-[salvage value-book value]tax rate 6 Equipment 2000k $375k-[$375k-200]*40%=305 [old machine] 7 TAX credit 100 tax credit=5/100*2000k=100 8 Depreciaton per year 300k depreciation=initial cost -salvage/economic life=2000k-200k/6=300k 9 Sales period 1 1000k growth: g yrs 2-3 = 15% g yrs 4-6 = 5% 10 CoGS %of sales 1000k tax credit=5/100*2000k=100 11 SG&A exp. %of sales 100k ATSV new machine=300k-[300k-200k]*40%=260k 12 ATSV new @ t=6 260k 13 14 Operating Life CFs 15 Time 0 1 2 3 4 5 6 16 Sales $ 1,000 $ 1,150 $ 1,323 $1,389 $1,458 $1,531 17 - COGS 450 518 595 625 656 689 18 - SG&A expenses 100 115 132 139 146 153 19 - Depreciation 300 300 300 300 300 300 20 = EBIT 150 217 123 325 356 389 21 -Taxes (40%) 60 87 49 130 142 156 22 = Net Income 90 130 74 195 214 233 NPV Scenario / Risk Analysis: 23 + Depreciation 300 300 300 300 300 300 Complete the grids below to report 5x5 Grids of NPV vs input variable changes noted 24 = Operating CF 390 430 394 495 514 533 25 26 Time 0 Investments NPV Analysis Grid: NPV vs Discount Rate & Salvage Value Ranges 27 Equipment 2000k SV -> SV-20% SV-10% SV Base SV+10% SV+20% 28 ATSV old 305 240 270 300 330 360 29 Tax credit 100 ATSV -> ATSV-20% ATSV-10% ATSV Base ATSV+10% ATSV+20% 30 NWC 1,595 $NPV in Cells: 224 242 260 278 296 31 Cost of Capital 4% $242 $252 $260 $267 $274 32 Terminal Non-OCF: 6% $252 $257 $260 $262 $263 33 ATSV new @ t=6 260 8% $261 $261 $260 $257 $254 34 NWC 1,595 10% $271 $266 $260 $253 $245 35 = Net Cash Flow -$2,000 $390 $430 $394 $495 $514 $2,388 12% $281 $271 $260 $248 $236 36 = Cummulative CF -$2,000 -$1,610 -$1,180 -$786 -$291 $223 $2,611 37 38 Cost of Capital 8% 39 NPV $1,168 40 IRR = 21.4% NPV Analysis Grid: NPV vs Discount Rate & Year 1 Sales Ranges 41 PBP = 1 42 PI = 43 44 NPV Data Table 45 46 47 48 49 50 51 52 53 54 55 56 3.14 Rates NPV Sales Yr.1 -> $NPV in Cells: Cost of Capital 4% 6% 8% 10% 12% Sales Yr.1 Sales Yr.1 Sales Yr.1 Sales Yr.1 Sales Yr.1 -20% -10% Base +10% +20% 800 900 1000 1100 1200 $865 $936 $1,000 $1,058 $1,109 $899 $954 $1,000 $1,038 $1,068 $933 $972 $1,000 $1,019 $1,029 $968 $990 $1,000 $1,000 $992 $1,004 1oo8 $1,000 $982 $957