Wolfpack, Inc., a textile manufacturing company, is considering opening a production and shipping facility to keep up with demand for its pillows. The facility is expected to require an initial investment of $190,000 and will have a $36,000 salvage value after 5 years. Net annual revenue is estimated to be $100,000. Determine how sensitive the decision to invest in the new facility is to the estimates of initial cost and net annual revenue. Use a MARR of 4% per year and a 5- year study period.

Question

Quizplus · Accepted Answer

The Answer of Wolfpack, Inc., a textile manufacturing company, is considering opening a production and shipping facility to keep up with demand for its pillows. The facility is expected to require an initial investment of $190,000 and will have a $36,000 salvage value after 5 years. Net annual revenue is estimated to be $100,000. Determine how sensitive the decision to invest in the new facility is to the estimates of initial cost and net annual revenue. Use a MARR of 4% per year and a 5- year study period.