High	Base	Low
Cost ($)	500,000	400,000	300,000
Sales (units)	85,000	60,000	35,000
Net profit per unit ($)	1.15	1.00	.85

You are evaluating the NPV of a project to expand sales into a new region. The cost of the expansion is paid in year 0. The benefits of the expansion start in year 1 and last for 10 years, after which they end. Profits are determined by multiplying netprofitperunit by the amount of sales. There is some uncertainty about the cost and other parameters. We have high, low and base (most likely) estimates for each of the parameters.

a) The annual interest rate is 5%. What is the NPV at the base values of the parameters?

b) Show how sensitive the results are to the assumptions about sales, netprofitsperunit, and cost (use the high and low values of the parameters where appropriate).

c) Do a scenario analysis and determine the NPV for the best and worst cases. (Be careful here, what combination of results is best? What combination is worst?)