The Estimated Cash Flows of an Investment Project Are Shown

Essay

The estimated cash flows of an investment project are shown below. $$\begin{array} { | l | l | l | } \hline \text { Item } & \begin{array} { l } \text { Estimated Cash } \\\text { Flows }\end{array} & \text { Sensitivity Range } \\\hline \text { Initial investment, } \$ & 55,000 & \pm 5 \% \\\hline \text { Annual revenue, } \$ & 7000 & \pm 10 \% \\\hline \text { Annual expense, } \$ & 4500 & \pm 10 \% \\\hline \text { Market value, } \$ & 1800 & \pm 15 \% \\\hline \text { Project life, years } & 8 & \pm 5 \% \\\hline\end{array}$$ Using an interest rate of 2% per year, analyze the sensitivity of the PW to changes in initial investment and annual revenue, and determine the breakeven percentage changes of these two factors.