Question: Perform sensitivity analysis on the NPV for the given projects. Project Initial Investment Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3

Perform sensitivity analysis on the NPV for the given projects.

Project

Initial Investment

Cash Flow Year 1

Cash Flow Year 2

Cash Flow Year 3

Discount Rate

Base NPV

Q

$200,000

$60,000

$80,000

$100,000

10%

$20,000

R

$250,000

$70,000

$90,000

$120,000

12%

$25,000

What is the NPV for Project Q if the cash flows are increased by 10%? 

What is the NPV for Project R if the cash flows are decreased by 10%? 

Requirement: Perform sensitivity analysis under different conditions.

What is the NPV for Project Q if the discount rate increases to 12%? 

What is the NPV for Project R if the discount rate decreases to 10%?

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