Instruction
I need someone that can paraphraise those 2 answers
IT HAS TO BE DONE IN 2 HOURS
From the learnings of sensitivity analysis the variables with highest PV change must be kept in the model as these are volatile and can bring about lot of variations in the model. The effect of by-product should be considered in the model as this has the capability to alter the composition of the raw material. ABC analysis can be used to categorize the variables according to their cost, this can also be helpful in identifying the variables that must be included in the model.
So the variables that must be included in the model are: by product production, market price of brightener, raw material cost growth, raw material costs, impurities in raw materials, cost multiplier on investment and brightener price growth.
Information that can be helpful in eliminating variables are effect of a variable on other variables, if the effect is positive or negative i.e., value added or non value added, variable that is most difficult to detect variation.
2- The variable that should definately by kept in the model depends on the type of analysis. Since the analysis is a focus on the numerous uncertain variable that could affect the value of the investment, it is a good idea to kept the numerical data pertaining to progression or decompotition overtime. This information is what is useful on this type of analysis. For instance, the following data should definately be kept: Cost Multiplier on Investment, Cost Multiplier on Operations expenses, cost multiplier on Maintenance Expenses, Raw Material Cost Growth, By-Product Price Growth, Plant Efficiency, Brightener Production, Market Price of other By-Product and By-Products Produced. The information involving the Market Prices of Brightener and By-Product during the 1970's is not useful as in it does not pertain to this type of analysis. In addition, if the analysis calls for a case study involving the improvements since the 70's or a case study involving the changes in technology, production type, or production efficiency within a time variable, then such information can be useful, however, no such analysis is called for. Many Variables listed can be combined into one variable, since such detail analysis is not needed. Items pertaining to cost such as, operations expense, maintenance expense, water reclamation costs, government regulations cost and raw material costs could all be under one heading. This would greatly reduce the amount of information being analyzed for the investment.