Question: Microsoft Excel, create a spreadsheet to evaluate the Pear Computer Company proposal (below) assuming a discount rate of 14%. Conduct a simple sensitivity analysis for
Microsoft Excel, create a spreadsheet to evaluate the Pear Computer Company proposal (below) assuming a discount rate of 14%. Conduct a simple sensitivity analysis for the discount rate by increasing the discount rate by 3 percentage points. That means that you should have one sheet using 14% and a second sheet using the adjusted discount rate. Alternatively, you could include two NPV calculations on a single sheet. Make sure that you have adjusted Excel as follows before you save and submit your assignment. Set Excel to fit each sheet to one page, to show gridlines, and to include column and row headings (e.g., A, and 1). Also, use the landscape layout. Pear Computers research and development (R&D) department has developed a proposal for a new generation of tablet-sized computers. Based on the data below, do you recommend adoption of the proposal? Why or why not? You may type the recommendation and explanation on the Excel sheet. 1.Projects useful life: 4 years. 2.Capital expenditures: $25,000,000. 3.Depreciation: straight-line over 4 years. 4.Sales: 25000 units in year 1, 95,000 in year 2, 70,000 in year 3, 25,000 in year 4. The sales price is expected to remain constant at $580. 5.Cost of goods sold (not counting depreciation): 60% of sales. 6.Selling, general and administrative expenses: $1,500,000 the first year, $1,750,000 the second year, $1,000,000 the third, and $500,000 the 4th. 7.R&D: $1,500,000 spent one year ago. 8.Initial investment in net working capital: $1,250,000. Then it increases by $10,000 for each of three years and finally is fully recovered in the final year. 9.Tax rate: 38%. 10.Cost of Capital: 14%.
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
