Consider the following investment opportunity:Capital Investment (End of Year 0)Expenses (per year)Revenues (geometric series)$450,000$25,000$60,000 in the first year,increasing 5% per yearfollowingMarket value (End of Year 20)Study Period (years)MARR (per year)$90,00020 years10%10% Interest Table Use your answer to part (b) and the following results to construct a rough graph displayingthe sensitivity of the PW of the project to % change in each of the factors. Label where eachline intersects the x-axis and y-axis clearly.% change to Decision Reversal (breakeven)+ 17.2%Calculated in part bCash Flow EstimateCapital Investment (End of Year 0)Expenses (per year)Revenues (geometric series)Market value (End of Year 20)-10.6%-577.6%To which of the four factors is the decision most sensitive? Explain the reasoning for yourchoice in your supporting work.Capital investmentExpensesRevenuesO Market valueExplain how you would apply the concept of incremental IRR to decide between TheLancelot and The Bella.

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Economics

Consider the following investment opportunity:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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