Perform two-parameter sensitivity analysis

Assignment Help Financial Management

Reference no: EM131075783

An investment of $1.5 million is made at time zero with annual revenues of $600,000 in year 1, growing at a rate of 15% annually over a seven-year horizon. Annual operating and maintenance costs are estimated at $150,000 per year increasing every year by $10,000 thereafter. The salvage value of the investment is $1 million at the end of year 7. There is uncertainty about the estimates of the revenues and the salvage therefore you are asked to perform a two-parameter sensitivity analysis (before tax) to determine the range of feasibility of the variation of those parameters. The company uses a MARRof 15%.

Reference no: EM131075783

Questions Cloud

Purpose of nist special publication : Write a 2-page APA style paper summarizing the background, description, and purpose of NIST Special Publication, 800-34, Rev. 1, Contingency Planning Guide for Federal Information Systems.

Write the linear equation in slope-intercept form : Write the linear equation in slope-intercept form. Find the slope-intercept equation of the line passing through the two given points. Show work. State the domain of the function g (x) = (x + 9) / (x - 3) g(x) = (x + 9)/(x - 3).

Discuss the global operations of boeing : Give examples - specific cases and also discuss the global operations of Boeing, Benetton, Sony, FedEx, UPS, Volvo, Dominos & Haier. What are the challenges faced in global operations management? Pros & cons of outsourcing?

Discuss the legal issues raised by ians situation : Discuss the legal issues raised by Ian's situation. Ians sister is requesting information from counselor - What are the implications of these legal issues regarding the choices.

Perform two-parameter sensitivity analysis : An investment of $1.5 million is made at time zero with annual revenues of $600,000 in year 1, growing at a rate of 15% annually over a seven-year horizon. There is uncertainty about the estimates of the revenues and the salvage therefore you are ask..

Determining the actual and prospective costs : A financial measure that evaluates the efficiency of an investment by determining the actual and prospective costs and benefits over time

Correspondence principle means : Correspondence principle means:

What price will the stock reach equilibrium : A share of stock with a beta of .81 now sells for $69. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 4%, and the market risk premium is 7%. Suppose investors believe the stock will sell for $71 at year-end. Is the st..

User Account

All Pages