Using Microsoft Excel, create a spreadsheet to evaluate the project described below.

• Conduct a sensitivity analysis for revenues by increasing revenues by 10% above the best estimate, and then by decreasing revenues by 10% below the best estimate. 
• You must provide one spreadsheet for each of the three situations. 
• Make sure that you have adjusted Excel as follows before you save and submit your assignment. Set Excel to fit each sheet to one page, to show gridlines, and to include column and row headings (e.g., A, and 1). Also, use the landscape layout.

MAXIMIZE THE USE OF FORMULAS!

Happy Toy's research and development (R&D) department has developed a proposal for a new toy. Based on the data below, do you recommend adoption of the proposal? Why or why not? 

1. Initial capital expenditures: $50,000,000.
2. Depreciation: straight-line over 4 years
3. Sales: $13,750,000 in year 1, 23,500,000 in year 2, 40,250,000 in year 3, 44,750,000 in year 4.
4. Cost of goods sold (not counting depreciation): 65% of sales.
5. Selling, general, and administrative expenses: $1,500,000 in year 1, $1,750,000 in year 2, $2,000,000 in year 3, and $2,200,000 in year 4.
6. R&D: $1,500,000 spent one year ago. 
7. Initial investment in net working capital: $1,250,000. Then it increases by an additional $1,000,000 for each of four years.
8. The firm currently owns unused equipment that will be used if the project is adopted, and sold for $25,000 if not. 
9. After Year 4 the firm expects net cash flows to grow continuously at the expected rate of inflation of 2%.
10. Tax rate: 39%.
11. Cost of Capital: 14%.

NOTE: Always remember to maximize the use of formulas!