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You are considering buying a corner snow cone business for $100,000. As a conservative business person,...

You are considering buying a corner snow cone business for $100,000. As a conservative business person, you assume zero salvage value at the end of the project. You assume annual sales of 12,000 snow cones per year. The price of a snow cone in year 1 is $5.00/ea. Operating costs are estimated to be $8,000/yr. The project evaluation life is 3 years, and the minimum rate of return is 15%.

(a) Conduct a single-variable sensitivity analysis of the project, looking specifically at the net present value and rate of return. Assume there is potential variation in the capital cost of 15%. Depending on the weather, your annual sales may vary by as much as 10% and operating costs as much as 7%.

(b) Summarize your results using tornado charts.

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jeff jeffy answered 2 years ago
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