The following table contains Grant’s estimates of demand, price, and fixed and variable costs for the Mooreliner under three alternative economic forecasts.
Important info –
The initial investment for the Mooreliner is $120,000,000
Cost of Capital 12%
Tax rate 35%
Project life 10 yrs
Required:
If all variables are assumed to be at their expected value (normal forecast).
How sensitive is the project’s NPV to changes in fixed cost?
How sensitive is the project’s NPV to changes in prices?
How sensitive is the project’s NPV to changes in variable cost?
Which factors seems most important to the success of the plane?
Is the Mooreliner a risky project? Explain
