please answer using formual and not with excel...thanx Question 5 Use the plot b

Question

please answer using formual and not with excel...thanx

Question 5 Use the plot below to answer the questions: a) What is the name given to such a diagram and what is its usefulness? b) Which component is most sensitive to positive changes? c) Which component is least sensitive to changes? ) Determine an approximate value for the Annual Worth of the original project. e) The engineer discovered that the planning horizon has been increased by 10%. Estimate the percentage change in the Annual Worth from the original estimate What percentage change in the MARR would cause the project to become unattractive? (10 marks) 70.000 60.000 $50.000 nitial investment innual savings 40.000 30.000 $20000 alvage value MARR % 40% -10% 10% 30% 40% Planning -510.000 $20.000 $30.000 $40.000

Explanation / Answer

a) The plot is called the project sensitivity analysis and it depicts the effect of changes in various parameters of the project on its annual worth

b) The thing most sensitive to the Annual worth is the parameter of Annual Savings. For the base case, the AW is ~ 15000 and for about 20% increase in annual savings, the AW increases to > $ 30000

c) The salvage value is least sensitive to changes as it has a flat line

d) Approximate value of AW is ~ $15,000

e) For base value, the AW is ~ 15000

For a 10% increase in planning horizon, the AW is ~ 17500

So % change is (17500-15000)/15000 = 16.67%

f) For an increase in MARR by 40%, the AW would be zero and project becomes unattractive.

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