### Manufacture of a new chemical compound

Assignment Help Other Subject
##### Reference no: EM13776019

Project Risk Analysis -Sensitivity Analysis

Project Risk Analysis -Sensitivity Analysis. HMG is considering the manufacture of a new chemical compound that is used to make high-pressure plastic containers. An investment of \$4 million in plant and equipment is required. The firm estimates that the investment will have a five year life, using straight-line depreciation towaard a zero salvage value. However, the investment has an anticipated salvage equal to 10% of its original cost. The number of pounds of the chemical compound that HMG expects to sell over the five year life of the project are as follows (in millions): 1, 1.5, 3, 3.5, and 2. To operate the new plant, HMG estimates that it will incur additional fixed cash operating expenses of \$1 million per year and variable operating expenses equal to 45% of revenues. Furthermore, HMG estimates that it will need to invest 10% of the anticipated increase in revenues each year in net working capital. The price per pound for the new compound is expected to be \$2 in Years 1 and 2, then \$2.50 per pound in Years 3 through 5. HMG's tax rate is 38%, and it requires a 15% rate of return on its new product investments.

a. What are the key sources of risk that you see in this project?

b. Use the "goal seek" function within Excel to find the breakeven values for each of the following variables: the initial CAPEX, the working capital percentage of revenue growth, variable cost % of sales, and sale volume

c. Which of the variables analyzed in part b do you think is the greatest source of concern? What, if anything, could you do to reduce the risk of the project?

d. Should you always seek to reduce project risk?

#### Identify the effects of this pollution on human health

Create a 5-to 8-slide PowerPoint presentation or a 350-to 525-word proposal. Identify the effects of this pollution on human health and the environment. Explain the causes of

#### Would you utilize punishment or reinforcement

Choose a behavior you would like to shape on someone you know. Select a terminal and initial behavior and the steps you would use to shape the behavior. Would you utilize puni

#### Define similarities and differences of the her code sets

Describe the similarities and differences of the HER code sets. In no more than one paragraph discuss why an HER code set has to provide equilibrium between granularity and

#### Evaluate the societal impact of a technology in an area

Evaluate the societal impact of a technology in an area of your choosing such as the environment, medicine, genetics, entertainment, education, or family life. Consider the

#### How can the content of consumer blogs affect companies

Marketing The blog (Web log) is a personal, contemporary, and sometimes interactive publishing of information on the Internet. Blogging has become an extremely popular activit

#### Expand upon one of the topics a colleague

Expand upon one of the topics a colleague described by sharing additional information and/or perspectives on the topic. Cite and explain resources related to a colleague's to

#### Support the operation of a large dental practice

A new patient management system is to be developed to support the operation of a large dental practice. The system will be used by the dentists, dental nurses, and reception

#### Discuss the procedure and the legal requirements

BLAW 2006 COMPANY LAW FOR BUSINESS CASE STUDY. Discuss the procedure and the legal requirements that may have been required to be satisfied under the Corporations Act 2001 (C