Sensitivity Analysis Pessimistic Base Optimistic

Cost $ 1,100,000.00 Units Sold 112,700.00 118,500.00 124,300.00

Salvage 10000 Price per unit 90 $ 90.00 90
Years 8 VC per unit 55 $ 55.00 55
Depr FC per year 35000 $ 35,000.00 35000
Depr Ex $ 136,250.00
RRR 20% OCF $ 2,814,170.00 $ 2,948,150.00 $ 3,082,130.00
Tax rate 34% NPV $250,711.05 $293,178.18 $335,645.31
NWC 15000
Sensitivity Analysis - As Units Sold Changes, What Does NPV do?
The Steeper the line, the more forecast risk associated with variable.
Units Sold NPV
Pessimistic 112700 $249,920.32
Base 118500 $ 292,387.45
Optimistic 124300 $ 334,854.57
 NPV
$400,000.00
$350,000.00
$300,000.00
$250,000.00 NPV
$200,000.00
$150,000.00
$100,000.00
$50,000.00
$0.00
Does NPV do?
ed with variable.
 Year Units Unit Price Total Sales
0
1 13,000 $ 90.00 $ 1,170,000.00
Year Projected Unit Sales 2 15,000 $ 90.00 $ 1,350,000.00
1 13,000 3 16,000 $ 90.00 $ 1,440,000.00
2 15,000 4 16,500 $ 90.00 $ 1,485,000.00
3 16,000 5 17,600 $ 90.00 $ 1,584,000.00
4 16,500 6 16,500 $ 90.00 $ 1,485,000.00
5 17,600 7 15,400 $ 90.00 $ 1,386,000.00
6 16,500 8 14,300 $ 90.00 $ 1,287,000.00
7 15,400
8 14,300
124,300 Depreciation

VC each year/unit $55 RRR 20.00% NPV

Total Fixed Cost Each
Year $35,000
Net working capital at
start $15,000

Initial Cost Equipment $1,100,000 Sensitivity with 10

Depreciation Method Straight Line
Salvage Value $10,000
Tax Rate 0.34
RRR 20.00%
VC / unit Total VC FC Depr EBIT Taxes

$ 55.00 $ 715,000.00 $35,000 $ 136,250.00 $ 283,750.00 $ 96,475.00

$ 55.00 $ 825,000.00 $35,000 $ 136,250.00 $ 353,750.00 $ 120,275.00
$ 55.00 $ 880,000.00 $35,000 $ 136,250.00 $ 388,750.00 $ 132,175.00
$ 55.00 $ 907,500.00 $35,000 $ 136,250.00 $ 406,250.00 $ 138,125.00
$ 55.00 $ 968,000.00 $35,000 $ 136,250.00 $ 444,750.00 $ 151,215.00
$ 55.00 $ 907,500.00 $35,000 $ 136,250.00 $ 406,250.00 $ 138,125.00
$ 55.00 $ 847,000.00 $35,000 $ 136,250.00 $ 367,750.00 $ 125,035.00
$ 55.00 $ 786,500.00 $35,000 $ 136,250.00 $ 329,250.00 $ 111,945.00

(1100000-10000)/8 1090000 136250 Dep+ Salvage+NWC

$334,854.57 Dep+ NWC

Sensitivity with 10% upside after 4th year

 NI Add dep Cashflow
-$1,115,000.00
$ 187,275.00 $ 136,250.00 $ 323,525.00
$ 233,475.00 $ 136,250.00 $ 369,725.00
$ 256,575.00 $ 136,250.00 $ 392,825.00
$ 268,125.00 $ 136,250.00 $ 404,375.00
$ 293,535.00 $ 136,250.00 $ 429,785.00
$ 268,125.00 $ 136,250.00 $ 404,375.00
$ 242,715.00 $ 136,250.00 $ 378,965.00
$ 217,305.00 $ 157,850.00 $ 375,155.00
$ 3,078,730.00

Salvage+NWC
 Year Units Unit Price Total Sales VC / unit
0
1 13,000 $ 90.00 $ 1,170,000.00 $ 55.00
Year Projected Unit Sales 2 15,000 $ 90.00 $ 1,350,000.00 $ 55.00
1 13,000 3 16,000 $ 90.00 $ 1,440,000.00 $ 55.00
2 15,000 4 16,500 $ 90.00 $ 1,485,000.00 $ 55.00
3 16,000 5 14,400 $ 90.00 $ 1,296,000.00 $ 55.00
4 16,500 6 13,500 $ 90.00 $ 1,215,000.00 $ 55.00
5 14,400 7 12,600 $ 90.00 $ 1,134,000.00 $ 55.00
6 13,500 8 11,700 $ 90.00 $ 1,053,000.00 $ 55.00
7 12,600
8 11,700
112,700 Depreciation (1100000-10000)/8

VC each
year/unit $55 RRR 20.00% NPV $249,920.32

Total
Fixed
Cost Each
Year $35,000

Net
working
capital at
start $15,000

Initial
Cost
Equipmen
t $1,100,000 Sensitivity with 10% downsid
Deprecia
tion
Method Straight Line
Salvage
Value $10,000
Tax Rate 0.34
RRR 20.00%
 Total VC FC Depr EBIT Taxes NI Add dep

$ 715,000.00 $35,000 $ 136,250.00 $ 283,750.00 $ 96,475.00 $ 187,275.00 $ 136,250.00

$ 825,000.00 $35,000 $ 136,250.00 $ 353,750.00 $ 120,275.00 $ 233,475.00 $ 136,250.00
$ 880,000.00 $35,000 $ 136,250.00 $ 388,750.00 $ 132,175.00 $ 256,575.00 $ 136,250.00
$ 907,500.00 $35,000 $ 136,250.00 $ 406,250.00 $ 138,125.00 $ 268,125.00 $ 136,250.00
$ 792,000.00 $35,000 $ 136,250.00 $ 332,750.00 $ 113,135.00 $ 219,615.00 $ 136,250.00
$ 742,500.00 $35,000 $ 136,250.00 $ 301,250.00 $ 102,425.00 $ 198,825.00 $ 136,250.00
$ 693,000.00 $35,000 $ 136,250.00 $ 269,750.00 $ 91,715.00 $ 178,035.00 $ 136,250.00
$ 643,500.00 $35,000 $ 136,250.00 $ 238,250.00 $ 81,005.00 $ 157,245.00 $ 157,850.00

1090000 136250 Dep+ Salvage+NWC

Dep+ NWC

y with 10% downside after 4th year

Cashflow
-$1,115,000.00
$ 323,525.00
$ 369,725.00
$ 392,825.00
$ 404,375.00
$ 355,865.00
$ 335,075.00
$ 314,285.00
$ 315,095.00
$ 2,810,770.00
Start Price per unit $90 Pro Forma Information
Year
Year Projected Unit Sales
1 13,000
2 15,000
3 16,000
4 16,500
5 16,000
6 15,000
7 14,000
8 13,000
118,500
Units Unit Price
0
1 13,000 $ 90.00
2 15,000 $ 90.00
3 16,000 $ 90.00
4 16,500 $ 90.00
5 16,000 $ 90.00
6 15,000 $ 90.00
7 14,000 $ 90.00
8 13,000 $ 90.00

VC each year/unit $55 RRR 20.00%

Total Fixed Cost Each Year $35,000
Net working capital at start $15,000
Initial Cost Equipment $1,100,000
Depreciation Method Straight Line
Salvage Value $10,000
Tax Rate 0.34
RRR 20.00%
Requirments
a Estimates the Project after tax Cash Flows
b Calculate the NPV
c Perform Sensetivity analysis for 10% upside and downside change i
d Perform Scenario Analysis if all the parameters changes by 10% ups
Total Sales VC / unit Total VC FC Depr

$ 1,170,000.00 $ 55.00 $ 715,000.00 $35,000 $ 136,250.00

$ 1,350,000.00 $ 55.00 $ 825,000.00 $35,000 $ 136,250.00
$ 1,440,000.00 $ 55.00 $ 880,000.00 $35,000 $ 136,250.00
$ 1,485,000.00 $ 55.00 $ 907,500.00 $35,000 $ 136,250.00
$ 1,440,000.00 $ 55.00 $ 880,000.00 $35,000 $ 136,250.00
$ 1,350,000.00 $ 55.00 $ 825,000.00 $35,000 $ 136,250.00
$ 1,260,000.00 $ 55.00 $ 770,000.00 $35,000 $ 136,250.00
$ 1,170,000.00 $ 55.00 $ 715,000.00 $35,000 $ 136,250.00

Depreciation (1100000-10000)/8 1090000 136250

NPV $292,387.45

Requirments
a Estimates the Project after tax Cash Flows
b Calculate the NPV
c Perform Sensetivity analysis for 10% upside and downside change in units sold
d Perform Scenario Analysis if all the parameters changes by 10% upside and dow
10% upside and downside change in units sold after the 4th year
he parameters changes by 10% upside and downside
 EBIT Taxes NI Add dep Cashflow
-$1,115,000.00
$ 283,750.00 $ 96,475.00 $ 187,275.00 $ 136,250.00 $ 323,525.00
$ 353,750.00 $ 120,275.00 $ 233,475.00 $ 136,250.00 $ 369,725.00
$ 388,750.00 $ 132,175.00 $ 256,575.00 $ 136,250.00 $ 392,825.00
$ 406,250.00 $ 138,125.00 $ 268,125.00 $ 136,250.00 $ 404,375.00
$ 388,750.00 $ 132,175.00 $ 256,575.00 $ 136,250.00 $ 392,825.00
$ 353,750.00 $ 120,275.00 $ 233,475.00 $ 136,250.00 $ 369,725.00
$ 318,750.00 $ 108,375.00 $ 210,375.00 $ 136,250.00 $ 346,625.00
$ 283,750.00 $ 96,475.00 $ 187,275.00 $ 157,850.00 $ 345,125.00
$ 2,944,750.00

Dep+ Salvage+NWC

Dep+ NWC

nd downside change in units sold after the 4th year

s changes by 10% upside and downside
 Year Units Unit Price Total Sales
0
1 14,300 $ 99.00 $ 1,415,700.00
Year Projected Unit Sale 2 16,500 $ 99.00 $ 1,633,500.00
1 14,300 3 17,600 $ 99.00 $ 1,742,400.00
2 16,500 4 18,150 $ 99.00 $ 1,796,850.00
3 17,600 5 17,600 $ 99.00 $ 1,742,400.00
4 18,150 6 16,500 $ 99.00 $ 1,633,500.00
5 17,600 7 15,400 $ 99.00 $ 1,524,600.00
6 16,500 8 14,300 $ 99.00 $ 1,415,700.00
7 15,400
8 14,300
130,350 Depreciation

VC each year/unit $55 RRR 20.00% NPV

Total Fixed Cost Each
Year $35,000
$15,000

Initial Cost Equipment $1,100,000 SCENARIO WITH 10%

TAX 34%
RRR 20%
VC / unit Total VC FC Depr EBIT Taxes

$ 49.50 $ 707,850.00 $31,500 $ 136,250.00 $ 540,100.00 $ 183,634.00

$ 49.50 $ 816,750.00 $31,500 $ 136,250.00 $ 649,000.00 $ 220,660.00
$ 49.50 $ 871,200.00 $31,500 $ 136,250.00 $ 703,450.00 $ 239,173.00
$ 49.50 $ 898,425.00 $31,500 $ 136,250.00 $ 730,675.00 $ 248,429.50
$ 49.50 $ 871,200.00 $31,500 $ 136,250.00 $ 703,450.00 $ 239,173.00
$ 49.50 $ 816,750.00 $31,500 $ 136,250.00 $ 649,000.00 $ 220,660.00
$ 49.50 $ 762,300.00 $31,500 $ 136,250.00 $ 594,550.00 $ 202,147.00
$ 49.50 $ 707,850.00 $31,500 $ 136,250.00 $ 540,100.00 $ 183,634.00

(1100000-10000)/8 1090000 136250 Dep+ Salvage+NWC

$1,031,831.54 Dep+ NWC

SCENARIO WITH 10% UPSIDE CHANGE

 NI Add dep Cashflow
-$1,115,000.00
$ 356,466.00 $ 136,250.00 $ 492,716.00
$ 428,340.00 $ 136,250.00 $ 564,590.00
$ 464,277.00 $ 136,250.00 $ 600,527.00
$ 482,245.50 $ 136,250.00 $ 618,495.50
$ 464,277.00 $ 136,250.00 $ 600,527.00
$ 428,340.00 $ 136,250.00 $ 564,590.00
$ 392,403.00 $ 136,250.00 $ 528,653.00
$ 356,466.00 $ 161,250.00 $ 517,716.00
$ 4,487,814.50

Salvage+NWC
 Year Units Unit Price Total Sales
0
1 11,700 $ 81.00 $ 947,700.00
Year Projected Unit Sales 2 13,500 $ 81.00 $ 1,093,500.00
1 11,700 3 14,400 $ 81.00 $ 1,166,400.00
2 13,500 4 14,850 $ 81.00 $ 1,202,850.00
3 14,400 5 14,400 $ 81.00 $ 1,166,400.00
4 14,850 6 13,500 $ 81.00 $ 1,093,500.00
5 14,400 7 12,600 $ 81.00 $ 1,020,600.00
6 13,500 8 11,700 $ 81.00 $ 947,700.00
7 12,600
8 11,700
106,650 Depreciation

VC each year/unit $55 RRR 20.00% NPV

Total Fixed Cost Each
Year $35,000
Net working capital at
start $15,000

Initial Cost Equipment $1,100,000 SCENARIO WITH 1

TAX 34%
RRR 20%
VC / unit Total VC FC Depr EBIT Taxes

$ 60.50 $ 707,850.00 $38,500 $ 136,250.00 $ 65,100.00 $ 22,134.00

$ 60.50 $ 816,750.00 $38,500 $ 136,250.00 $ 102,000.00 $ 34,680.00
$ 60.50 $ 871,200.00 $38,500 $ 136,250.00 $ 120,450.00 $ 40,953.00
$ 60.50 $ 898,425.00 $38,500 $ 136,250.00 $ 129,675.00 $ 44,089.50
$ 60.50 $ 871,200.00 $38,500 $ 136,250.00 $ 120,450.00 $ 40,953.00
$ 60.50 $ 816,750.00 $38,500 $ 136,250.00 $ 102,000.00 $ 34,680.00
$ 60.50 $ 762,300.00 $38,500 $ 136,250.00 $ 83,550.00 $ 28,407.00
$ 60.50 $ 707,850.00 $38,500 $ 136,250.00 $ 65,100.00 $ 22,134.00

(1100000-10000)/8 1090000 136250 Dep+ Salvage+NWC

($337,454.12) Dep+ NWC

SCENARIO WITH 10% DOWNSIDE CHANGE

 NI Add dep Cashflow
-$1,005,000.00
$ 42,966.00 $ 136,250.00 $ 179,216.00
$ 67,320.00 $ 136,250.00 $ 203,570.00
$ 79,497.00 $ 136,250.00 $ 215,747.00
$ 85,585.50 $ 136,250.00 $ 221,835.50
$ 79,497.00 $ 136,250.00 $ 215,747.00
$ 67,320.00 $ 136,250.00 $ 203,570.00
$ 55,143.00 $ 136,250.00 $ 191,393.00
$ 42,966.00 $ 157,850.00 $ 200,816.00
$ 1,631,894.50

Salvage+NWC
Pessimistic Base
Range of Values +/- 10.0% 10.00%

Cost $1,100,000 Cost

Years 8 Years
Depr Method SL Depr Method
Salvage 10000 Salvage
Depre Ex $ 136,250.00 Depre Ex
Unit Sales per year 106,650 Unit Sales per year
Price per unit $ 81.00 Price per unit
VC per unit $ 60.50 VC per unit
FC per year $ 38,500.00 FC per year
Tax Rate 0.34 Tax Rate
RRR 0.2 RRR
NWC 15,000 NWC (time zero -, time last +)

OCF: Pessimistic case. OCF: Base case.

NPV: Pessimistic case. ($337,454.12) NPV: Base case.
before taking this project. Maybe look at the past to see the volatility of VC a
VC industry.
Check: Time
ProForma Income 0
Sales $ 10,665,000.00 1
VC $ 6,517,500.00 2
FC $ 280,000.00 3
Depr $ 1,090,000.00 4
EBIT $ 2,777,500.00 5
Tax $ 944,350.00 6
NI $ 1,833,150.00 7
OCF $ 2,944,750.00 8
NPV
 Optimistic

$1,100,000 Cost $1,100,000

8 Years 8
SL Depr Method SL
10000 Salvage 10000
$ 136,250.00 Depre Ex $ 136,250.00
118,500 Unit Sales per year 130,350
$ 90.00 Price per unit $ 99.00
$ 55.00 VC per unit $ 49.50
$ 35,000.00 FC per year $31,500
0.34 Tax Rate 0.34
0.2 RRR 0.2
15,000 NWC 150,000

$ 2,944,750.00 OCF: Optimistic case. $ 4,487,814.50

$ 292,387.45 NPV: Optimistic case. $1,031,831.54
e the volatility of VC and to future economic data about the
industry.
CF
-1,115,000.00
323,525.00
369,725.00
392,825.00
404,375.00
392,825.00
369,725.00
346,625.00
345,125.00
292,387.45