COVID-19 brought tremendous change to the world from health, relationship, and economic perspectives. For this discussion, focuses on the economic perspectives to evaluate uncertainty for capital rationing decisions.

Everyone was impacted by the economic impacts of COVID-19 to include nonprofits. Donations plummeted and volunteers dried up but the community's need for help only grew. The table below provides information for the Transformation Station, a nonprofit that focuses on people experiencing homelessness for the first time. Transformation Station has determined they need a bigger storage facility. They first need to perform a sensitivity analysis to determine whether to build a larger storage facility.

	Conservative Estimate	Most Likely Estimate	Optimistic Estimate
Construction cost of warehouse	$7,800,000	$7,020,000	$6,630,000
Residual value	$ 0.00	$280,800	$331,500
Useful life	25 years	25 years	25 years
Estimated annual net cost savings	$702,000	$912,600	$1,193,400
Rate of return	10%	12%	14%
PV factor for ordinary annuity	9.077	7.843	6.873
PV factor for lump sum	0.092	0.059	0.038

Perform a sensitivity analysis for the three options above. Show your work to receive full points.

If you were the director of the Transformation Station, would you build the warehouse? Why? Remember that the economy is volatile. While we have three estimates (conservative, most likely, and optimistic), the reality of our outcome is dependent on the economy which we have little control over.