Can someone please assist with this question about sensitivity analysis or direct me where I can get more solid advice? Thanks, Pahajesu
Sensitivity Analysis and Capital Budgeting
Borb Free Ltd is contemplating an investment project with following details.
• Initial investment $ 7000000
• Cash Flows for the project life (2 years) are as follows:
• Sales: $ 6500000 per year (650000 units @ $ 10 per unit)
• Variable costs: $ 2000000 per year
• Cost of capital 8%
Calculate the following and write a report to management
1. Arrange net cash flows on the time line
2. Calculate NPV of the project
3. Calculate sensitivity of the project to the following:
a) Initial investment

b) Sales volume

c) Selling price per unit

d) Variable costs per unit

e) Cost of capital