Longhorn Enterprises is a private start-up based in Austin, TX that will make high-end leather bags. It wants to launch its products in the U.S. and, as such, needs to build a manufacturing facility in New Mexico. Goal is to have plant for 5 years and then liquidate it in 2027 at 1.0x the 2027 ending balance of net PP&E + working capital. Longhorn’s investment will be $1,500K in capital expenditures plus $250K in net working capital which is comprised of ($1,000K) in accounts receivables (A/R) and inventories minus $750K in accounts payables (A/P) and accrued expenses.

The attached Excel spreadsheet shows all other required assumptions.

Attach model to Canvas submission. Instructor will check for structure/interactivity of model [10 points]
What is the project’s NPV? [10 points]
Change the annual sales growth to 15% and gross margin to 25%. What’s the new NPV? [10 points]
Conduct a Goal Seek break-even analysis. What is the break-even gross margin required for this project to have a positive NPV? [10 points]
Conduct a 2x2 sensitivity analysis of sales growth (5%-15%) and gross margin (20%-40%). What conclusion do you make about this business case? [10 points]