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New Economy Transport – case assignment

The case solution is on the web site – links page. You will need to change the opportunity cost of capital.

Assignment

1. Sensitivity analysis – For each of the following, compare results and rankings with the base case. Briefly discuss your findings.

a. Check the current 10-year Treasury note yield. Add the 10% risk premium and recalculate.

b. Reduce the tax rate to 30% and realculate.

c. Eliminate salvage values in each case.

d. On the replacement, I made assumptions about training costs and the timing of the new boat costs. Make your own assumptions and recalculate.

2. Why do NPV and EAC rankings differ? Which ranking do you prefer? Why?

3. This spreadsheet was designed to accommodate only this case. What changes might you make to generalize the template to handle a wide variety of competing (mutually exclusive) projects in which you had to compare NPV and EAC results? Would you add other ranking criteria, such as IRR and PI?

New Economy Transport – case assignment

The case solution is on the web site – links page. You will need to change the opportunity cost of capital.

Assignment

1. Sensitivity analysis – For each of the following, compare results and rankings with the base case. Briefly discuss your findings.

e. Check the current 10-year Treasury note yield. Add the 10% risk premium and recalculate.

f. Reduce the tax rate to 30% and realculate.

g. Eliminate salvage values in each case.

h. On the replacement, I made assumptions about training costs and the timing of the new boat costs. Make your own assumptions and recalculate.

2. Why do NPV and EAC rankings differ? Which ranking do you prefer? Why?

3. This spreadsheet was designed to accommodate only this case. What changes might you make to generalize the template to handle a wide variety of competing (mutually exclusive) projects in which you had to compare NPV and EAC...