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  • New Economy Transport - Case Assignment

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    Uday Deogam
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    This case assignment involves analyzing investment alternatives for a company called New Economy Transport. The student is asked to: 1) Conduct a sensitivity analysis by changing the cost of capital and other variables and comparing results to the base case. 2) Explain why the NPV and EAC rankings may differ and state which method is preferred. 3) Suggest modifications to generalize the spreadsheet template to evaluate different projects and potentially add other ranking criteria like IRR and PI.

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    This case assignment involves analyzing investment alternatives for a company called New Economy Transport. The student is asked to: 1) Conduct a sensitivity analysis by changing the cost of capital and other variables and comparing results to the base case. 2) Explain why the NPV and EAC rankings may differ and state which method is preferred. 3) Suggest modifications to generalize the spreadsheet template to evaluate different projects and potentially add other ranking criteria like IRR and PI.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    9 views1 page

    New Economy Transport - Case Assignment

    Uploaded by

    Uday Deogam
    This case assignment involves analyzing investment alternatives for a company called New Economy Transport. The student is asked to: 1) Conduct a sensitivity analysis by changing the cost of capital and other variables and comparing results to the base case. 2) Explain why the NPV and EAC rankings may differ and state which method is preferred. 3) Suggest modifications to generalize the spreadsheet template to evaluate different projects and potentially add other ranking criteria like IRR and PI.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    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 results? Would you add other ranking criteria, such as IRR and PI?

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