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Tutorial 4, Sri Cempaka - 19522368 - Coggle Diagram
Tutorial 4
Sensitivity Analysis
Sensitivity analysis is intended to determine how sensitive a decision is to changes in the
parameters that influence it.
Sensitivity analysis is done by changing the value of a parameter at a time to see how it affects the feasibility of an alternative investment.
Parameters that usually change including sales volume, selling price, initial investment, economic life, residual value, operational costs and maintenance
Cost Estimates
Initial cost is the cost required to obtain an item and will not recur during its lifetime (initial investment). Example : machine prices, training costs, transportation etc
Operational and maintenance costs is repetitive costs needed to operate and maintain items during their lifetime. Generally, consists of direct labor costs, direct material costs and overhead costs.
Disposal fees is costs required for the removal or destruction of an item. Usually at the end of the cycle, an item still has a sale value. Selling value minus disposition costs is called salvage value.
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Break Even Point
Break-even point (BEP) is a term in accounting that refers to the situation where a company’s revenues and expenses were equal within a specific accounting period
Can be used to
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Determine the length of the period (or the number of units that must be produced) so
that the total income equals the total expenditure
Capital Structure
Capital structure refers to the specific mix of debt and equity used to finance a company's assets and operations. From a corporate perspective, equity represents a more expensive, permanent source of capital with greater financial flexibility.
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