Sensitivity Analysis in Capital Budgeting Analysis
Use Sheet “4” for this assignment. After you have completed the townhome investment model following the video lecture, do a sensitivity analysis by creating a two-input data table.
The two input variables are Rent and Resell Value:
- Rent ($16,000, $18,000,…, $30,000)
- Resell value ($250,000, $280,000, …, $550,000)
Show IRR as a function of these two variables. Then use conditional formatting to highlight the unprofitable combinations.
If you forgot how to create two-input data table, refer back to Module 1, we covered it in Module 1 and assigned the very first assignment based on two-input data table in that module. This is a very important skill and everyone should know how to create data tables.
| Construct input variables | 1 pt |
|---|---|
| Use the correct result cell | 1 pt |
| Complete the data table | 3 pts |
| Highlight correct cells using conditional formatting | 1 pt |
| Total | 6 pts |
| If you didn’t complete all the class work prior to this sheet | -2 pts |
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