Ch 11 Toolkit - A 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19...

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Tab 7 or "App. A" provides depreciation tables as described in Appendix A of the textbook. Tab 8 shows the Scenario Summary worksheet if Excel's Scenario Analysis tool is used in Figure 11-1. Analysis of an Expansion Project: Inputs and Key Results (Doll Part 1. Inputs and Key Results Inputs Base-Case Key Result Equipment cost $3,400 NPV Salvage value, equipment, Year 4 $300 IRR Opportunity cost $0 MIRR Tab 1 contains the basic model . It calculates an expansion project's cash flows and perfo measures using base-case, or most likely, values for the input variables. It also includes th analysis but with straight-line depreciation. Tab 2 extends the basic model (shown in Tab 1) to include sensitivity analysis using Da (we include a brief tutorial on the use of Data Tables). Tab 2 also illustrates special cases o sensitivity analysis, incuding breakeven analysis, one-way data tables with multiple output way data tables. Tab 3 extends the basic model (shown in Tab 1) to include scenario analysis , including Scenario Manager. Tab 4 extends the basic model (shown in Tab 1) to include simulation analysis . Tab 5 illustrates the the analysis for a proposed cost-reducing replacement investmen Replacement decisions differ from expansion decisions because most of the cash flows ar subtracting the old project's cash flows from those of the new project to calculate increme flows for use in the analysis. Tab 6 extends the scenario analysis in Tab 3 to examine two decision trees in which the de made in stages. The first one simply shows the situation where the firm can abandon the p things are not working out and cash flows are negative. The second one involves a market and a prototype of the final product designed to learn more about demand before deciding full production. ANALYSIS OF AN EXPANSION PROJECT (Section 11.2) The model uses the "Base-Case" input values shown below to calculate the NPV and other performance measures. The main model assumes that the firm uses accelerated depreciat modified version of the model, shown in Columns J through R, shows the results if the firm use straight-line depreciation. This analysis demonstrates that accelerated depreciation im project profitability. A B C D E F G H 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49
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Externalities (cannibalization) $0 PI Units sold, Year 1 550 Payback Annual change in units sold, after Year 1 4.00% Discounted payback Sales price per unit, Year 1 $11.60 Annual change in sales price, after Year 1 2.00%
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This note was uploaded on 06/11/2011 for the course FIN 5560 taught by Professor A during the Spring '11 term at Nova Southeastern University.

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Ch 11 Toolkit - A 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19...

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