A manufacturing firm is planning a capacity expansion project requiring capital investment of $500,000 (5-year MACRS asset) and fixed operation and maintenance costs of $25,000 per year for a 7-year project life. In the most likely scenario, the expansion would enable to the company to produce an additional 100,000 units per year. The parts would sell for $5 each with variable costs of $3 per part. The MARR of the firm is 10%. The asset has no salvage value at the end of the project, and the firm's marginal tax rate is 21%. Assume the above scenario represents the base case. A worst-case scenario would involve a 5% drop in demand, a 10% drop in sales price, and a 10% increase in variable cost. The best-case scenario would involve a 10% growth in demand, a 10% increase in sales price, and a 5% drop in variable cost. The company estimates the project stands a 20% chance of achieving the worst case, a 30% chance of the best case, and 50% chance of the base case. Perform a scenario analysis and explain how you would interpret the results. 0 Only the best case scenario has a positive net present worth, and it is $250K, and a 30% chance of making > $600K. While there is some risk, the expected value of this project is overwhelmingly positive. The base case has a nice return of $250K, but the worst case is very bad at $250K, there is not significant riskin this project