- From the cash flow evaluation, the NPV obtained for the first option, which is making the equipment, is estimated to be 3,522,373 while the NPV for purchasing from the supplier is 3,556,668. Consequently, is better for the company to make the waste containers s compared to purchasing from the suppler. The assumption made is that there will be no change in the rate of inflation for the next five years.
- A sensitivity analysis refers to the process of determining how varying values of an independent variable will affect the dependent variable based on a specific set of assumptions. The analysis is important because it can be used to predict how the interest rates may impact prices of bonds or the predictions of the prices of shares in a publicly traded company. The sensitivity analysis is as shown in the attached excel file.
There are notable non-financial as well as qualitative factors that Jonfran Company has to consider before making the final decision. Firstly, the company should consider the quality of the waste containers when acquiring them from the suppliers. Since waste containers are part of the company’s products, they have the responsibility of maintaining….
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