ENGINEERING ECONOMICS ECO 1192B

White Assignment: Sensitivity Analysis

C.Thoret Winter 2013

A. 1. 2. 3. 4. 5. 6.

Assignment Instructions Consult the Excel assignment allocation file on Virtual Campus for your assignment. You will get a zero score for completing a different assignment. You must use a White answer sheet with a White assignment. The colour of the Scantron answer sheet is provided by a Highlighter mark in the upper right-hand corner of the sheet. The Course Code on the Scantron answer sheet for this assignment is ECO1192BW. Do not forget to darken the appropriate ovals. Answer sheets will be distributed by the instructor at the March 28th lecture are to be submitted at 7 pm at the April 4th lecture. Each assignment is worth 15% of the overall course grade. Late Scantron sheets will most definitely be rejected. Problem Statement ABC Company officials have provided their best guesses of the parameters of the proposed construction of a new distribution warehouse. These best guesses are: 1. Initial Cost (P) = $500,000 2. Salvage value (SV) = $467 3. Annual revenues (AR) = $300,000 4. Annual operating costs (AC)= $160,000 5. Economic life (N) = 5 years 6. MARR = 10% 7. Inflation Rate = 0% 1|Page

7. 8. B.

8. Neither risk nor uncertainty. Due to the uncertainty underlying these best guesses youve been asked to perform a one-way sensitivity analysis. C. Assignment Requirements

Table 1 Net Present Worth Parameters P AOR AOC SV N MARR C1. -15% AA CC EE GG II KK -10% -5% Reference Scenario +5% +10% +15% BB DD FF HH JJ LL

The dollar value (nearest $100) of cell AA in Table 1 is a) $78,000; b) $98,000; c) $106,000; d) $65,000; e) None of these answers. The dollar value (nearest $100) of cell BB in Table 1 is a) -$44,000; b) $44,100; c) -$34,000; d) $85,300; e) None of these answers. The dollar value (nearest $100) of cell CC in Table 1 is a) $131,900; b) -$119,300; c) -$139,600; d) -$119,900; e) None of these answers. The dollar value (nearest $100) of cell DD in Table 1 is a) $201,600; b) $201,000; c) $210,200; d) $212,300; e) None of these answers. The dollar value (nearest $100) of cell EE in Table 1 is a) $120,500; b) $121,700; c) $121,900; d) $122,000; e) None of these answers.

C2.

C3.

C4.

C5.

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C6.

The dollar value (nearest $100) of cell FF in Table 1 is a) -$59,100; b) -$60,000; c) $59,10; d) $60,000; e) None of these answers. The dollar value (nearest $100) of cell GG in Table 1 is a) $29,800; b) $31,000; c) $31,200; d) $31,300; e) None of these answers. The dollar value (nearest $100) of cell HH in Table 1 is a) $31,000; b) $29,900; c) $30,900; d) $31,200; e) None of these answers. The dollar value (nearest $100) of cell II in Table 1 is a) -$29,900; b) -$30,100; c) -$28,500; d) -$33,400; e) None of these answers.

C7.

C8.

C9.

C10. The dollar value (nearest $100) of cell JJ in Table 1 is a) $88,900; b) $91,000; c) $92,000; d) $92,100; e) None of these answers. C11. The dollar value (nearest $100) of cell KK in Table 1 is a) $52,000; b) $52,100; c) $54,300; d) $54,500; e) None of these answers. C12. The dollar value (nearest $100) of cell LL in Table 1 is a) $10,700; b) $11,200; c) $11,300; d) $11,500; e) None of these answers. C13. The second most influential parameter on the projects NPW in the range -15%/+15% is a) P; b) AOR; c) AOC; d) SV; e) MARR. C14. The second least influential parameter on the projects NPW in the range -15%/+15% is a) P; b) N; c) AOR; d) AOC; e) MARR. C15. The breakeven (NPW=$0) dollar value (nearest $100) of the initial cost parameter (P) is a) $500,000; b) $520,000; c) $530,000; d) $531,000; e) None of these answers. C16. The breakeven (NPW=$0) dollar value (nearest $100) of the annual revenue parameter (AR) is a) $290,000; b) $290,500; c) $291,800; d) $292,000; e) None of these answers.

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C17. The breakeven (NPW=$0) dollar value (nearest $100) of the annual cost parameter (AC) is a) $165,300; b) $168,200; c) $170,400; d) $170,600; e) None of these answers. C18. The breakeven (NPW=$0) dollar value (nearest $100) of the salvage value parameter (SV) is a) -$48,400; b) -$48,300; c) $49,500; d) -$49,500; e) None of these answers. C19. The breakeven (NPW=$0) duration (in years to 2 decimals) of the project is a) 4.50; b) 4.60; c) 4.63; d) 4.70; e) None of these answers. C20. The breakeven (NPW=$0) MARR (percentage to 1 decimal) of the project is a) 12.5%; b) 9.4%; c) 15.5%; d) 18.2%; e) None of these answers. C21. You are asked to perform a scenario analysis instead of a sensitivity analysis. The project parameters of the three scenarios (optimistic, most likely and pessimistic) are to be populated with the parameter values from the sensitivity tables shown above. In a scenario analysis, the value of the initial cost (P) of the project in the calculation of the NPW of the pessimistic scenario would be a) 500,000; b) 500,000(1.15); c) 500,000(0.85); d) None of these answers. C22. You are asked to perform a scenario analysis instead of a sensitivity analysis. The project parameters of the three scenarios (optimistic, most likely and pessimistic) are to be populated with the parameter values from the sensitivity tables shown above. In a scenario analysis, the value of the annual revenues (AOR) of the project in the calculation of the NPW of the most likely scenario would be a) 300,000; b) 300,000(1.15); c) 300,000(0.85); d) None of these answers. C23. You are asked to perform a scenario analysis instead of a sensitivity analysis. The project parameters of the three scenarios (optimistic, most likely and pessimistic) are to be populated with the parameter values from the sensitivity tables shown above. In a scenario analysis, the value of the annual cost (AOC) of the project in the calculation of the NPW of the pessimistic scenario would be a) 160,000; b) 160,000(1.15); c) 160,000(0.85); d) None of these answers. C24. You are asked to perform a scenario analysis instead of a sensitivity analysis. The project parameters of the three scenarios (optimistic, most likely and pessimistic) are to be populated with the parameter values from the sensitivity tables shown above. 4|Page

In a scenario analysis, the project life (N) in the calculation of the NPW of the optimistic scenario would be a) 5; b) 5(1.15); c) 5(0.85); d) None of these answers. C25. You are asked to perform a scenario analysis instead of a sensitivity analysis. The project parameters of the three scenarios (optimistic, most likely and pessimistic) are to be populated with the parameter values from the sensitivity tables shown above. In a scenario analysis, the MARR (%) in the calculation of the NPW of the pessimistic scenario would be a) 10; b) 10(1.15); c) 10(0.85); d) None of these answers. o-o-o-o

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