The purpose of sensitivity analysis is to show

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Reference no: EM132055468

1. The purpose of a sensitivity analysis is to show:

A) the optimal level of capital expenditures

B) how price changes affect break-even volume

C) seasonal variation in product demand

D) how variables in a project affect profitability

2. John's Company is considering purchasing a new machine to replace an obsolete one. The new machine would cost $75,000, including delivery. It would cost another $20,000 to modify the machine so it could be used. In addition it was cost another $7,000 in net operating working capital. The machine is expected to reduce pre tax costs by $9,000 ayear. John's tax rate is 35%. IF this project was selected, what would the cash flows be for year 0 (CFO)?

A. -96,150

B. -82,000

C. -93,000

D. -102,000

Reference no: EM132055468

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