Question: Sensitivity analysis - Illustration 2 E' 000 t-0 t-1 t-2 t-3 t-4 Sales 1,000 1,000 1,000 1,000 Costs (600) (600) Required: (600) (600) Operating Profit

Sensitivity analysis - Illustration 2 E' 000 t-0 t-1 t-2 t-3 t-4 Sales 1,000 1,000 1,000 1,000 Costs (600) (600) Required: (600) (600) Operating Profit 400 400 400 400 Compute the Tax (30%) (120) (120) (120) (120) NPV sensitivity Net Profit to: 280 280 280 280 (a) Sales Capital Expenditure (600) (b) Costs Tax relief on depreciation 45 45 45 45 (c) Tax rate (30% x 600/4) (d) Discount Net cash flow rate (600) 325 325 325 325 (e) Sales Discount factor @ 10% 1 0.909 0.826 0.751 0.683 volume

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