Chapter 11. Ch 11-18 Build a Model

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Chapter 11. Ch 11-18 Build a Model Click Link Below To Buy: has developed a powerful new server that would be used for corporations’ Internet activities. It would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 10% of the year's projected sales; for example, NWC0 = 10%(Sales1). The servers would sell for $24,000 per unit, and Webmasters believes that variable costs would amount to $17,500 per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 3%. The company’s…show more content…
Include a graph in your analysis. Part 6. Evaluating Risk: Sensitivity Analysis I. Sensitivity of NPV to Changes in Inputs. Here we use Excel "Data Tables" to find NPVs at different unit sales, WACC, variable costs, sales price and nonvariable costs--changing one variable at a time, holding other things constant. % Deviation 1st YEAR UNIT SALES % Deviation WACC from Units NPV from NPV Base Case Sold $0 Base Case WACC $0 -20% 0 -20% 0 -10% 0 -10% 0 0% 0 0% 0 10% 0 10% 0 20% 0 20% 0 % Deviation VARIABLE COST % Deviation SALES PRICE from Variable NPV from Sales NPV Base Case Costs $0 Base Case Price $0 -20% 0 -20% 0 -10% 0 -10% 0 0% 0 0% 0 10% 0 10% 0 20% 0 20% 0 Note about data tables. The data in the column input should NOT be input using a cell reference to the column input cell. For example, the base case number of units sold in Cell B105 should be the number 1000; you should NOT have the formula =D29 in that cell. This is because you'll use D29 as the column input cell in the data table and if Excel tries to iteratively replace Cell D29 with the formula =D29 rather than a series of numbers, Excel will calculate the wrong answer. Unfortunately, Excel won't tell you that there is a problem, so you'll just

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