1/1/2012

Chapter 11 Mini Case

Cash Flow Estimation
Situation
Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is
being conducted by Sidney Johnson, a recently graduated MBA. The production line would be set up in unused
space in Shrieves' main plant. The machinerys invoice price would be approximately $200,000, another $10,000 in
shipping charges would be required, and it would cost an additional $30,000 to install the equipment. The machinery
has an economic life of 4 years, and Shrieves has obtained a special tax ruling that places the equipment in the
MACRS 3-year class. The machinery is expected to have a salvage value of $25,000 after 4 years of use.
The new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per
unit in the first year, excluding depreciation. Each unit can be sold for $200 in the first year. The sales price and
cost are expected to increase by 3% per year due to inflation. Further, to handle the new line, the firms net working
capital would have to increase by an amount equal to 12% of sales revenues. The firms tax rate is 40%, and its
overall weighted average cost of capital is 10%.
a. Define incremental cash flow. Answer: See Chapter 11 Mini Case Show
(1.) Should you subtract interest expense or dividends when calculating project cash flow? Answer: See
Chapter 11 Mini Case Show
(2.) Suppose the firm had spent $100,000 last year to rehabilitate the production line site. Should this be
included in the analysis? Explain. Answer: See Chapter 11 Mini Case Show
(3.) Now assume that the plant space could be leased out to another firm at $25,000 per year. Should this be
included in the analysis? If so, how? Answer: See Chapter 11 Mini Case Show
(4.) Finally, assume that the new product line is expected to decrease sales of the firms other lines by
$50,000 per year. Should this be considered in the analysis? If so, how? Answer: See Chapter 11 Mini
Case Show
Analysis of New Expansion Project
Part I: Input Data
Equipment cost
Shipping charge
Installation charge
Economic Life
Salvage Value
Tax Rate
Cost of Capital
Units Sold
Sales Price Per Unit
Incremental Cost Per Unit
NWC/Sales
Inflation rate

$200,000
$10,000
$30,000
4
$25,000
40%
10%
1,250
$200
$100
12%
3%

Key Output: NPV =

$88,026

b. Disregard the assumptions in Part a. What is Shrieves' depreciable basis? What are the annual
depreciation expenses?
Annual Depreciation Expense
Depreciable Basis = Equipment + Freight + Installation
Depreciable Basis =
$240,000

Year
1
2
3
4

%
0.33
0.45
0.15
0.07

Basis
$240,000
240,000
240,000
240,000

Depr.
$79,200
108,000
36,000
16,800

Remaining
Book
Value
$160,800
52,800
16,800
0

c. Calculate the annual sales revenues and costs (other than depreciation). Why is it important to include
inflation when estimating cash flows? See answer to part d.
d. Construct annual incremental operating cash flow statements.
Annual Operating Cash Flows
Units
Unit price
Unit cost

Year 1
1,250
$200.00
$100.00

Year 2
1,250
$206.00
$103.00

Year 3
1,250
$212.18
$106.09

Sales
Costs
Depreciation
Operating income before taxes (EBIT)
Taxes (40%)
EBIT (1 T)
Depreciation
Net operating CF

$250,000
125,000
79,200
$45,800
18,320
$27,480
79,200
$106,680

$257,500
128,750
108,000
$20,750
8,300
$12,450
108,000
$120,450

$265,225
132,613
36,000
$96,613
38,645
$57,968
36,000
$93,968

Year 4
1,250
$218.55
$109.27
$273,182
136,591
16,800
$119,791
47,916
$71,875
16,800
$88,675

e. Estimate the required net working capital for each year, and the cash flow due to investments in net working
capital.
Annual Cash Flows due to Investments in Net Working Capital
Year 0
Sales
NWC (% of sales)
CF due to investment in NOWC)

30,000
(30,000)

Year 1
$250,000
30,900
(900)

Year 2
$257,500
31,827
(927)

Year 3
$265,225
32,782
(955)

Year 4
$273,182
32,782

f. Calculate the after-tax salvage cash flow.

Hypothetical: If sold after
3 years for

After-tax Salvage Value

Based on
facts in case:
$25,000
0
$25,000
10,000
$15,000

Salvage value
Book value
Gain or loss
Tax on salvage value
Net terminal cash flow

$25,000
$25,000
16,800
$8,200
3,280
$21,720

$10,000
$10,000
16,800
($6,800)
(2,720)
$12,720

g. Calculate the net cash flows for each year. Based on these cash flows, what are the projects NPV, IRR,
MIRR, and payback? Do these indicators suggest the project should be undertaken?

Projected Net Cash Flows

Year 0
Investment Outlay: Long Term Assets
Operating Cash Flows
CF due to investment in NWC
Salvage Cash Flows
Net Cash Flows
NPV
IRR

Year 1

Year 2

Year 3

$106,680
(900)

$120,450
(927)

$93,968
(955)

$105,780

$119,523

$93,013

Year 4

($240,000)
(30,000)
($270,000)

$88,026
23.9%

$88,675
32,782
15,000
$136,457

PV of InflowsTV of Inflows
$358,026
$524,186
Years

Find MIRR

0
($270,000)

Net Cash Flows

PV=

1
$105,780

2
$119,523

($270,000)

3
$93,013

4
$136,457
102,314
144,623
140,793
TV = $524,186

To find MIRR, we could now find the discount rate that equates the PV and TV. But it is easier to use the MIRR
function.
MIRR =
18.0%

Find Payback
Cash Flow
Cumulative Cash Flow for Payback
Payback =

2.5

0
($270,000)
($270,000)

1
$105,780
($164,220)

Years
2
$119,523
($44,697)

3
$93,013
$48,316

4
$136,457
$184,772

h. What does the term risk mean in the context of capital budgeting; to what extent can risk be quantified; and
when risk is quantified, is the quantification based primarily on statistical analysis of historical data or on
subjective, judgmental estimates?
Risk in capital budgeting really means the probability that the actual outcome will be worse than the expected
outcome. For example, if there were a high probability that the expected NPV as calculated above will actually turn
out to be negative, then the project would be classified as relatively risky. The reason for a worse-than-expected
outcome is, typically, because sales were lower than expected, costs were higher than expected, and/or the project
turned out to have a higher than expected initial cost. In other words, if the assumed inputs turn out to be worse
than expected then the output will likewise be worse than expected. We use Excel to examine the project's sensitivity
to changes in the input variables.
i. (1.) What are the three types of risk that are relevant in capital budgeting? Answer: See Chapter 11 Mini Case
Show
(2.) How is each of these risk types measured, and how do they relate to one another? Answer: See Chapter 11
Mini Case Show
(3.) How is each type of risk used in the capital budgeting process? Answer: See Chapter 11 Mini Case Show

Evaluating Risk: Sensitivity Analysis

Sensitivity of NPV and to Variations in Input Variables
j. (1.) What is sensitivity analysis? Answer: See Chapter 11 Mini Case Show
(2.) Perform a sensitivity analysis on the unit sales, salvage value, and cost of capital for the project. Assume
that each of these variables can vary from its base-case, or expected, value by plus and minus 10%, 20%, and
30%. Include a sensitivity diagram, and discuss the results.
Here we use an Excel "Data Table" to find the NPVs for changes in unit sales, salvage value, and WACC holding
other things constant--changing one variable at a time. This produces the sensitivity analys as shown below.
We summarize the data tables and show the sensitivity analysis graph below:
% Deviation
from
Base Case
-30%
-15%
0%
15%
30%

WACC
WACC
7.0%
8.5%
10.0%
11.5%
13.0%

NPV
88,026
$113,284
100,306
88,026
76,395
65,368

% Deviation 1st YEAR UNIT SALES % Deviation

SALVAGE
from
Units
NPV
from
Variable
NPV
Base Case
Sold
$88,026 Base Case
Cost
$88,026
-30%
875
$16,665
-30%
$17,500
$84,953
-15%
1,063
52,346
-15%
21,250
86,490
0%
1,250
88,026
0%
25,000
88,026
15%
1,438
123,707
15%
28,750
89,563
30%
1,625
159,387
30%
32,500
91,100

Evaluating Risk: Sensitivity Analysis

Sensitivity Analysis

NPV ($)
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
-40%

Units Sold

Salvage Value

WACC

-20%

0%

20%

40%

Deviation from Base-Case Value

Deviation
from
Base Case
-30%
-15%
0%
15%
30%
Range

NPV Deviation from Base Case

Units
WACC
Sold
Salvage
$113,284
$16,665
$84,953
100,306
52,346
86,490
88,026
88,026
88,026
76,395
123,707
89,563
65,368
159,387
91,100
$47,915

$176,053

$6,147

(3.) What is the primary weakness of sensitivity analysis? What is its primary usefulness? Answer: See
Chapter 11 Mini Case Show
k. Assume that Sidney Johnson is confident of her estimates of all the variables that affect the projects cash flows
except unit sales and sales price: If product acceptance is poor, unit sales would be only 900 units a year and the
unit price would only be $160; a strong consumer response would produce sales of 1,600 units and a unit price of
$240. Sidney believes that there is a 25% chance of poor acceptance, a 25% chance of excellent acceptance, and
a 50% chance of average acceptance (the base case).
(1.) What is scenario analysis?
Scenario analysis extends risk analysis in two ways: (1) It allows us to change more than one variable at a time, hence
to see the combined effects of changes in several variables on NPV, and (2) it allows us to bring in the probabilities
of changes in the key variables.
(2.) What is the worst-case NPV? The best-case NPV?
(3.) Use the worst-, most likely, and best-case NPVs and probabilities of occurrence to find the projects expected
NPV, standard deviation, and coefficient of variation.

Evaluating Risk: Scenario Analysis

We could find the NPV by entering the value of unit sales and price for each scenario and then recording the NPV
(this is what we did for the table below). Alternatively, we could use Tools, Scenarios to define the inputs for each
scenario, which we did and show in the Scenario Summary Tab below. In fact, you could even use Tools, Scenarios,
and then click the Summary button on the dialog box, and it will automatically create a table similar to the one
below. This is a powerful feature of Excel, and we encourage you to explore it.

Scenario Analysis
Scenario

Probability

Unit Sales

Unit Price

25%
50%
25%

1,600
1,250
900

$240
$200
$160

Best Case
Base Case
Worst Case

Expected NPV =
Standard Deviation =
Coefficient of Variation = Std Dev / Expected NPV =

NPV

Squared Deviation
times Probability

$278,965
$88,030
($48,514)

$7,862,111,358.79
$92,450,542.34
$5,635,612,088.43
Quick calculation:
$101,628
$101,628
$116,577
$116,577
1.15

l. Are there problems with scenario analysis? Define simulation analysis, and discuss its principal advantages and
disadvantages. Answer: See Chapter 11 Mini Case Show

Monte Carlo Simulation

Monte Carlo simulation is similar to scenario analysis in that different values of key input variables are used. Unlike
scenario analysis, Monte Carlo simulation draws the input values from specified probability distributions and then
computes the NPV. It repeats this process hundreds, or even thousands, of times. It then averages the NPVs from
each repetition.

Risk Adjusted Cost of Capital

m. (1.) Assume that Shrieves' average project has a coefficient of variation in the range of 0.2 to 0.4. Would the
new line be classified as high risk, average risk, or low risk? What type of risk is being measured here?
Answer: See Chapter 11 Mini Case Show
(2.) Shrieves typically adds or subtracts 3 percentage points to the overall cost of capital to adjust for risk.
Should the new line be accepted?
The CV of this project is 1.15, which is larger than the CV range of the firm's average project. Consequently, this
project is riskier than the firm's average project, so management should add 3% to the WACC to risk adjust.
Cost of capital for average projects:
Adjustment for risky projects:
Risk adjusted cost of capital:
NPV with risk-adjusted cost of capital:

10%
3%
13%
$65,368 (See the +30% WACC in the sensitivity analysis above.)

(3.) Are there any subjective risk factors that should be considered before the final decision is made? Answer:
See Chapter 11 Mini Case Show
m. What is a real option? What are some types of real options? Answer: See Chapter 11 Mini Case Show

Scenario Summary
Current Values:

Base Case

Changing Cells:
$D$36
$200,000
$200,000
$D$37
$10,000
$10,000
$D$38
$30,000
$30,000
$D$39
4
4
$D$40
$25,000
$25,000
$D$41
40%
40%
$D$42
10%
10%
$D$43
1,250
1,250
$D$44
$200
$200
$D$45
$100
$100
$D$46
12%
12%
$D$47
3%
3%
Result Cells:
$C$113
$88,030
$88,030
$C$114
23.9%
23.9%
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created. Changing cells for each
scenario are highlighted in gray.

Best Case

$200,000
$10,000
$30,000
4
$25,000
40%
10%
1,600
$240
$100
12%
3%
$278,965
48.3%

Worst Case

Base-but forget inflation

$200,000
$10,000
$30,000
4
$25,000
40%
10%
900
$160
$100
12%
3%

$200,000
$10,000
$30,000
4
$25,000
40%
10%
1,250
$200
$100
12%
0%

($48,514)
1.0%

$78,387
22.7%

Section 11.7 Scenario Analysis

Monte Carlo simulation is similar to scenario analysis in that different values of key inputs are used Unlike scenario
analysis, Monte Carlo simulation draws a trial set of input values from specified probability distributions and then
computes the NPV for this trial. This process is repeated for hundreds, or even thousands, of trials, with key results
(like NPV) saved from each trial. After running the number of desired trials, the NPVs from the trials can be averaged
estimate the project's expected NPV; the trial results can also be used to provide a histogram showing the project's
possible outcomes.

The green area below is the same project as in the mini case, but we have replaced the inputs fro units sold and sales
price with random variables drawn from normal distributions with the expected values and means shown next to the
inputs. Notice that each time the sheet makes a calculation, the values for unit sales, sales price, and NPV change (Hin
you can make the sheet calculate by hitting the F9 key).

Here is a tip for simulating a project analysis. If you have already done the analysis and it is in a different worksheet, s
how many rows it takes. Delete the green area below and add enough rows so that there will be room for your previou
analysis. For example, this model was in the "Model" tab in the file Ch 11 Mini Case.xls , rows 33-132. We went into tha
file, selected Rows 32-135, copied them, and then pasted them into Rows 32-135 of this Worksheet. Because we paste
them into the same row numbers from which we copied them, all the formula references remained correct. We then
edited this worksheet.

Analysis of New Expansion Project

Part I: Input Data
Equipment cost
Shipping charge
Installation charge
Economic Life
Salvage Value
Tax Rate
Cost of Capital
Units Sold
Sales Price Per Unit
Incremental Cost Per Unit
NWC/Sales
Inflation rate

$200,000
$10,000
$30,000
4
$25,000
40%
10%
1,485
$219
$100
12%
3%

Random variable =
Random variable =

Key Output: NPV =

Expected
Value
Std. Dev.
1,250
200
$200
$30

b. Disregard the assumptions in Part a. What is Shrieves' depreciable basis? What are the annual
Annual Depreciation Expense
Depreciable Basis = Equipment + Freight + Installation
Depreciable Basis =
$240,000

Year

Basis

Depr.

1
2
3
4

0.33
0.45
0.15
0.07

$240,000
240,000
240,000
240,000

$79,200
108,000
36,000
16,800

c. Calculate the annual sales revenues and costs (other than depreciation). Why is it important to include
inflation when estimating cash flows? See answer to part d.
d. Construct annual incremental operating cash flow statements.
Annual Operating Cash Flows
Units
Unit price
Unit cost

Year 1
1,485
$219.37
$100.00

Year 2
1,485
$225.95
$103.00

Year 3
1,485
$232.73
$106.09

Sales
Costs
Depreciation
Operating income before taxes (EBIT)
Taxes (40%)
EBIT (1 T)
Depreciation
Net operating CF

$325,845
148,538
79,200
$98,107
39,243
$58,864
79,200
$138,064

$335,621
152,994
108,000
$74,627
29,851
$44,776
108,000
$152,776

$345,692
157,584
36,000
$152,108
60,843
$91,265
36,000
$127,265

e. Estimate the required net working capital for each year, and the cash flow due to investments in net working
capital.
Annual Cash Flows due to Investments in Net Working Capital
Year 0
Sales
NWC (% of sales)
CF due to investment in NOWC)

39,101
(39,101)

Year 1
$325,845
40,275
(1,174)

f. Calculate the after-tax salvage cash flow.

After-tax Salvage Value

Salvage value
Book value
Gain or loss
Tax on salvage value
Net terminal cash flow

Year 2
$335,621
41,483
(1,208)

Year 3
$345,692
42,727
(1,244)

Hypothetical: If sold
Based on
facts in case:
$25,000
0
$25,000
10,000
$15,000

$25,000
$25,000
16,800
$8,200
3,280
$21,720

$10,000
$10,000
16,800
($6,800)
(2,720)
$12,720

g. Calculate the net cash flows for each year. Based on these cash flows, what are the projects NPV, IRR,
MIRR, and payback? Do these indicators suggest the project should be undertaken?

Projected Net Cash Flows

Year 0

Year 1

Year 2

Investment Outlay: Long Term Assets

Operating Cash Flows
CF due to investment in NWC
Salvage Cash Flows
Net Cash Flows
NPV
IRR

($240,000)
(39,101)
($279,101)
$188,709
37.4%

$138,064
(1,174)

$152,776
(1,208)

$136,890

$151,568

PV of Inflows
TV of Inflows
$467,810
$684,920
Years

Find MIRR

0
($279,101)

Net Cash Flows

1
$136,890

2
$151,568

PV= ($279,101)
To find MIRR, we could now find the discount rate that equates the PV and TV. But it is easier to use the MIRR function.
MIRR =
25.2%

Find Payback
0
1
($279,101) $136,890
($279,101) ($142,211)

Cash Flow
Cumulative Cash Flow for Payback
Payback =

Years
2
$151,568
$9,357

1.9

How the Simulation Works

We use a Data Table to perform the simulation (the Data Table is below, shaded bright yellow). When the Data Table is
updated, it will insert new random variables for each of the inputs we allow to change in Panel A above, run the analys
is Panel C above, and then save the NPV for each trial (we also save the input variables for each trial so that we can
verify that they are behaving as we expect). We set the first column of the Data Table (the variable to be changed in ea
row) to numbers from 1-100. We don't really use these numbers anywhere in the analyis, but if we tell the Data Table t
treat these as the Column inputs, Excel will recalculate all items in the Data Table, including the random inputs and th
resulting NPV. In other words, we "trick" Excel into doing a simulation. We tell Excel to insert each of the Column inpu
in the Data Table into the cell immediately below this box. This cell isn't linked to anything else, but each time Excel
updates a row of the Data Table, all the random values will be updated.
Column input cell to "trick" Excel into updating random variables in Data Table:

Excel normally updates all values in a Data Table each time any cell that is related to the Data Table changes. In our
case, we have random variables in the Data Table, so each time any cell in the worksheet makes a calculation, the Dat
Table is updated. If the Data Table has many rows, updating it can take up to 20 or 30 seconds. With only 100 rows, it
updates very quickly. But if it bothers you, you can set the worksheet to do automatic calculation except for data table

You don't need to change anything in this section. It will be updated automatically if you do a simulation. The summa
of the simulation results and the histogram are based on the simulation trials n the Data Table below and are updated
automatically when you do a simulation. You can do an updated simulation by hitting the F9 key.

Figure 11-27 Summary of Simulation Results (Thousands of Dollars)

Number of Trials =

Mean
Standard deviation
Maximum
Minimum

100
Simulated Input Variables and Key Results
Sales
Key Results:
Price Per
NPV
Units Sold
Unit
$1,280
199
$89,403
221
30
$83,604
1,786
272
$291,009
838
119
-$91,203

Median
Probability of NPV > 0
Coefficient of variation

$81,777
86.0%
0.94

Probability

-291,009

-145,504

145,504

NPV ($)

Output of Simulation in Data Table

Trial Number
1
2
3
4
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

Units Sold
1,485
1286.4418
987.56646
988.66522
961.89588
1576.558
1550.4039
915.11743
1330.9959
1141.8941
1191.3958
1198.0698
1323.6941
959.24721
1332.5825
864.44556
1396.1755
1123.8948
1001.7728
1378.2263
1186.5449
1379.0628
1209.8423
848.97229
1566.1622
1388.4118
1206.9476
1526.2278
1176.8269
1205.1292
1177.2635
1354.374
1342.5931
1123.2977
1375.1261
1767.0401
1702.6843
1381.5838
985.60931
1187.235
1069.7153
1366.9459
915.39405
1416.3912

Sales Price
Per Unit
$219
195.9223
261.22552
172.83622
152.60289
242.21225
227.14475
226.35045
192.29614
184.87605
194.55978
171.87254
190.10262
218.42795
202.08658
146.15347
140.61386
221.48622
221.23507
204.88904
170.95729
180.09233
157.36125
213.23064
201.93062
196.3712
207.77276
181.08644
179.84892
185.2283
272.30684
197.06012
209.52277
213.89411
243.72929
119.12158
211.25553
201.73928
165.55957
167.87042
231.33881
212.78389
233.67922
220.72696

NPV
$188,709
84770.1249
155540.739
-13876.1625
-55358.9746
279448.685
226951.795
71145.5661
83524.5459
33909.4793
64285.1221
12682.6575
76601.8187
67036.1507
109139.301
-75769.1803
-45218.0339
110936.995
82116.0785
125521.135
9010.54218
59255.5191
-19829.5067
33538.1912
154070.331
104579.159
98061.19
84509.3362
28031.9439
44911.032
239550.33
100152.342
130482.85
94235.7366
228652.408
-91203.4304
211398.264
117740.898
-28228.2962
1978.32921
118843.913
144225.005
84244.2996
176725.616

44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95

1483.9245
1225.7136
1411.4842
1128.449
1441.1985
997.63677
1349.9929
1138.6369
1210.0944
1437.9396
1506.2886
1339.9211
1455.1541
1313.8266
1416.1463
1256.1977
1198.1991
1622.5228
1178.9652
1235.6515
1716.566
838.34202
1543.9464
1786.0216
1248.4751
1065.4118
839.06204
1537.4824
1286.2522
1507.0986
1300.0919
1305.4022
1340.4016
1203.1425
1126.8315
1049.6159
1647.0967
1282.6876
970.52486
1319.2708
1201.2391
1443.5183
1195.8431
1488.3572
1099.9464
1480.6397
1527.5799
1120.9392
1167.1577
1746.6447
1314.8341
958.86425

165.53009
221.17434
165.73588
212.35655
185.3975
201.05387
157.81077
220.21378
267.33939
230.38128
175.63362
190.89281
206.80612
191.09623
241.67443
233.83715
137.21253
241.90766
184.91718
248.76766
192.07921
202.17806
196.21087
169.71382
157.2398
179.21692
195.72642
176.51587
175.11074
165.07453
254.51812
191.72077
244.26588
134.81989
203.25189
191.63905
208.48968
192.88699
177.85289
205.21869
163.96571
174.11081
198.38857
205.36092
197.67381
214.83614
226.11027
202.22142
164.47961
218.9593
208.28927
215.84567

33177.2212
133819.171
24805.8851
91986.0398
83531.3617
42048.0139
-3588.16959
111542.515
238731.166
208654.1
65500.3913
81438.7795
146306.011
77442.9503
234287.742
171781.17
-67973.2082
291008.595
39969.4169
202362.128
150403.771
13235.3433
132596.986
84952.2343
-15966.6836
9884.39799
2865.15327
72600.6048
32729.4839
34702.1686
235251.139
77579.0708
220489.67
-73230.416
71708.15
32847.0208
190765.763
76520.4849
-6913.23537
114587.248
-5338.68499
52249.414
73976.2338
148891.138
54499.9825
174592.481
218333.309
68309.7318
-8266.97487
246862.228
121533.863
62141.1734

96
97
98
99
100

1076.0013
1435.5205
1307.0832
1617.3489
1149.8379

240.71634
182.47692
192.94571
200.4013
211.69949

140025.898
74467.5335
80982.412
159200.505
95099.3112

1/1/2012

uts are used Unlike scenario

bility distributions and then
nds, of trials, with key results
rom the trials can be averaged to
ogram showing the project's

inputs fro units sold and sales

and means shown next to the
ales price, and NPV change (Hint:

d it is in a different worksheet, see

e will be room for your previous
, rows 33-132. We went into that
Worksheet. Because we pasted
s remained correct. We then

$188,709

ual

Remaining
Book Value

$160,800
52,800
16,800
0

o include

Year 4
1,485
$239.71
$109.27
$356,060
162,307
16,800
$176,953
70,781
$106,172
16,800
$122,972

in net working

Year 4
$356,060
42,727

NPV, IRR,

Year 3

Year 4

$127,265
(1,244)
$126,021

$122,972
42,727
15,000
$180,699

Years
3
$126,021

TV =

4
$180,699
138,623
183,398
182,201
$684,920

to use the MIRR function.

Years
3
$126,021
$135,378

4
$180,699
$316,077

yellow). When the Data Table is

n Panel A above, run the analysis
for each trial so that we can
he variable to be changed in each
s, but if we tell the Data Table to
uding the random inputs and the
insert each of the Column inputs
ing else, but each time Excel

Don't change the the red cell.

e Data Table changes. In our

et makes a calculation, the Data
econds. With only 100 rows, it
calculation except for data tables.

ou do a simulation. The summary

a Table below and are updated
he F9 key.

Scratch work for chart: see comments.

Count

291,009

NPV ($)

Range bottom
-$291,009
-$270,222
-$249,436
-$228,650
-$207,863
-$187,077
-$166,291
-$145,504
-$124,718
-$103,932
-$83,145
-$62,359
-$41,573
-$20,786
$0
$20,786
$41,573
$62,359
$83,145
$103,932
$124,718
$145,504
$166,291
$187,077
$207,863
$228,650
$249,436

0
0
0
0
0
0
0
0
0
0
1
3
2
1
7
6
9
6
16
11
8
6
6
3
2
5
6
0

Percent
0%
0%
0%
0%
0%
0%
0%
0%
0%
1%
3%
2%
1%
7%
6%
9%
6%
16%
11%
8%
6%
6%
3%
2%
5%
6%
0%

$270,222
$291,009
Sum

2
0
100

2%
0%
100%