Brandt Enterprises is considering a new project that has an estimated NPV of $800. The assistant to CFO conducted a sensitivity analysis with regard to sales price and salvage value. The results are documented in the table below: Sales price change by -30% -15% 0 15% 30% NPV results 579.2 724 800 876 1051.2 Salvage value change by -30% -15% 0 15% 30% NPV results 624 780 800 820 984 The assistant needs to explain what sensitivity is and what the results mean. Can you help to explain the above two issues?
Brandt Enterprises is considering a new project that has an estimated NPV of $800. The assistant to CFO conducted a sensitivity analysis with regard to sales price and salvage value. The results are documented in the table below: Sales price change by -30% -15% 0 15% 30% NPV results 579.2 724 800 876 1051.2 Salvage value change by -30% -15% 0 15% 30% NPV results 624 780 800 820 984 The assistant needs to explain what sensitivity is and what the results mean. Can you help to explain the above two issues?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Brandt Enterprises is considering a new project that has an estimated NPV of $800. The assistant to CFO conducted a sensitivity analysis with regard to sales price and salvage value. The results are documented in the table below:
|
Sales price change by |
-30% |
-15% |
0 |
15% |
30% |
|
NPV results |
579.2 |
724 |
800 |
876 |
1051.2 |
|
Salvage value change by |
-30% |
-15% |
0 |
15% |
30% |
|
NPV results |
624 |
780 |
800 |
820 |
984 |
The assistant needs to explain what sensitivity is and what the results mean. Can you help to explain the above two issues?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education