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  • Sensitivity Analysis and Scenario Analysis

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    varunjajoo
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    This document presents a scenario and sensitivity analysis for a $200,000 project with a five-year life and straight-line depreciation to zero. It analyzes the project's net present value (NPV) under different scenarios for variables like unit sales, price per unit, fixed costs, and variable costs. The analysis shows the project's NPV is most sensitive to changes in unit sales and price per unit. Under a best case scenario with high sales and price, the NPV is $159,504.33, while a worst case with low sales and price yields an NPV of -$140,521.19.

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    This document presents a scenario and sensitivity analysis for a $200,000 project with a five-year life and straight-line depreciation to zero. It analyzes the project's net present value (NPV) under different scenarios for variables like unit sales, price per unit, fixed costs, and variable costs. The analysis shows the project's NPV is most sensitive to changes in unit sales and price per unit. Under a best case scenario with high sales and price, the NPV is $159,504.33, while a worst case with low sales and price yields an NPV of -$140,521.19.

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    168 views6 pages

    Sensitivity Analysis and Scenario Analysis

    Uploaded by

    varunjajoo
    This document presents a scenario and sensitivity analysis for a $200,000 project with a five-year life and straight-line depreciation to zero. It analyzes the project's net present value (NPV) under different scenarios for variables like unit sales, price per unit, fixed costs, and variable costs. The analysis shows the project's NPV is most sensitive to changes in unit sales and price per unit. Under a best case scenario with high sales and price, the NPV is $159,504.33, while a worst case with low sales and price yields an NPV of -$140,521.19.

    Copyright:

    © All Rights Reserved
    Download as XLS, PDF, TXT or read online from Scribd
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    of 6

    SCENARIO AND SENSITIVITY ANALYSIS

    The project under consideration costs $200,000 , has a five year life , a
    Depreciation is straight line to zero. The required return is12 per cent
    The following information have been compiled
    Base Case

    Lower
    Bound

    Upper
    Bound

    Unit sales

    6000

    5500

    6500

    Price per
    unit

    $80

    $75

    $85

    Variable
    cost per
    unit

    $60

    $58

    $62

    $50,000

    $45,000

    $55,000

    Fixed
    costs per
    year

    SENSITIVITY ANALYSIS
    Normal
    Sales
    Price perunit
    Variable price
    Fixed cost
    Total costs
    Depreciation
    EBIT
    Taxes @ 34%

    CHANGING SALES
    Best

    Worst

    6000
    80
    60
    50000
    410000
    40000
    30000
    10200

    6500
    80
    60
    50000
    440000
    40000
    40000
    13600

    5500
    80
    60
    50000
    380000
    40000
    20000
    6800

    Net income

    19800

    26400

    13200

    OCF

    59800

    66400

    53200

    -200000
    59800
    59800
    59800
    59800
    59800
    0.12

    -200000
    66400
    66400
    66400
    66400
    66400
    0.12

    -200000
    53200
    53200
    53200
    53200
    53200
    0.12

    Initial invst
    Inflows

    Interest rate

    NPV

    $15,565.62

    $39,357.14

    ($8,225.91)

    as a five year life , and has no salvage value


    eturn is12 per cent and the tax rate is 34 per cent
    Perform scenario and sensitive analysis

    IVITY ANALYSIS
    Normal

    CHANGING FIXED COST


    Best

    SCENARIO ANALY
    Worst

    Normal

    6000
    80
    60
    50000
    410000
    40000
    30000
    10200

    6000
    80
    60
    45000
    405000
    40000
    35000
    11900

    6000
    80
    60
    55000
    415000
    40000
    25000
    8500

    6000
    80
    60
    50000
    410000
    40000
    30000
    10200

    19800

    23100

    16500

    19800

    59800

    63100

    56500

    59800

    -200000
    59800
    59800
    59800
    59800
    59800
    0.12

    -200000
    63100
    63100
    63100
    63100
    63100
    0.12

    -200000
    56500
    56500
    56500
    56500
    56500
    0.12

    -200000
    59800
    59800
    59800
    59800
    59800
    0.12

    $15,565.62

    $27,461.38

    $3,669.86

    $15,565.62

    SCENARIO ANALYSIS
    Best

    Worst

    6500
    85
    58
    45000
    422000
    40000
    90500
    30770

    5500
    75
    62
    55000
    396000
    40000
    -23500
    0

    59730

    -23500

    99730

    16500

    -200000
    99730
    99730
    99730
    99730
    99730
    0.12

    -200000
    16500
    16500
    16500
    16500
    16500
    0.12

    $159,504.33

    ($140,521.19)

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