Example (1) ABC Co is considering a project with the following cash flows. Year Initial investment ($000) 7,000 Variable costs ($000) Cash inflows ($000) Net cash flows ($000) 0 1 o 2 (2.000) (2.000) 6,500 6,500 4,500 4.500 Cash flows arise from selling 650,000 units at $10 per unit. ABC Co has a cost of capital of 8%. Required: Measure the sensitivity of the project to changes in variables. 16