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Business, 15.04.2020 04:39 kbuhvu

Let’s return to the proforma income statement we created for Microsoft’s Z Box (info given below) that we did in Week 2 and complete the analysis to determine if the project is desirable. Using the spreadsheet you constructed in Week 2 and the cost of capital calculations you computed in Week 8 to determine if Microsoft should continue with the Z Box project. Use the following capital budgeting techniques. 1. Payback period 2. Net present value 3. Internal rate of return Now let’s test the sensitivity of the project to some changes in the assumptions. 4. Take the cost of capital you previously computed (in week 8) and add 2% to the value (for example, if WACC was 12%, make it 14%) and recalculate NPV. What happens to IRR? Is the project still desirable? 5. Suppose the cost of goods sold percentage rises by 3%. Compute the payback period, NPV and IRR. Use the original WACC you computed. 6. How sensitive is NPV to the changes made in 4 and 5?

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Let’s return to the proforma income statement we created for Microsoft’s Z Box (info given below) th...
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