2.. Perform scenario analysis on the following project by first finding the NPV for the base case, then for the worst case and best case.

Base Case

Investment = $100,000 Straight line depreciation

over 2 years no salvage value

quantity sold per year = 20,000

Price per unit = $10 at time zero 4% inflation per year (price)

Operating Cost = $5 per unit (all variable) at time zero 2% inflation per year (cost)

Tax rate 25% cost of capital 10%

Project will have a 2 year life

Worst Case - Same information as base case but assume quantity sold of 14,000

Best Case - Same information as base case but assume quantity sold of 26,000