Explain and perform sensitivity analysis on the projects

Assignment Help Business Management

Reference no: EM1368537

Burlington Motor Carriers, a trucking company, is considering installing a two-way mobile satellite messaging service on its 2,000 trucks. On the basis of tests done last year on 120 trucks, the company found that satellite messaging could cut 60% from its $5 million bill for long-distance communication with truck drivers. More importantly, the drivers reduced the number of "deadhead" miles those driven with non paying loads by 0.5%. Applying that improvement to all 230 million miles coverd by the Burlington fleet each year would produce an extra $1.25 million savings.

Equipping all 2,000 with the satellite hookup will require an investment of $8 million and the construction of a message-relaying system costing $2million. The equipment and onboard devices will have a service life of eight years and negligible salvage value; they will be depreciated under the five-year MACRS class. Burlington's marginal tax rate is about 38%, and its required minimum attractive rate of return is 18%

(a) Determine the annual net cash flows from the project.

(b) Perform sensitivity analysis on the project's data, varying savings in telephone bills and savings in deadhead miles. Assume that each of these variable can deviate from its base-case expected value +-10%, +-20% and +-30%

Reference no: EM1368537

Questions Cloud

Compute the optimal order quantity : Compute the optimal order quantity and how many orders are placed annually and how frequently will orders be placed?

Program to match exam score to a letter grade : Create algorithm which will prompt the operator for student's serial number and student's exam score out of 100. Your program is then to match exam score to a letter grade.

Explain send a message to her references letting : Explain Send a message to her references letting them know that requests for information will be forthcoming and attach a current résumé.

Give hypothetical situation for signal type used in wan : Give a hypothetical situation for each signal type which illustrates how it could be, or is being, used in WAN. In what circumstance, for example, would a company choose to use a satellite signal?

Explain and perform sensitivity analysis on the projects : Explain and Perform sensitivity analysis on the project's data, varying savings in telephone bills and savings in deadhead miles

Explain respond to at least two of your classmates'' postings : Explain which would you prefer and Why and Respond to at least two of your classmates' postings and really engage your classmates in conversation.

Create-implement program which creates exception : Create and implement a program which creates an exception class called StringTooLongException, designed to be thrown when string is discovered that has too many characters in it.

Explain three social change areas it addresses : Explain why you chose the article and which of the three social change areas it addresses

Write various bindings to determine semantics : Write the various bindings that are required to determine the semantics when statement is executed. For each binding, indicate binding time used for language. Describe your answer.

User Account

All Pages