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Question 9 (7+3= 10 marks) New Shoes Company is considering a plan to manufacture shoes made from composite materials. The management has conducted market research and determined that the initial investment needed is $850,000. Additional information regarding the project is provided in the table below: Estimates Item Pessimistic Best Optimistic Sales (pairs) 20,000 30,000 45,000 35 45 50 Selling price per pair (S) Fixed operating costs ($ per 85,000 75,000 65,000 annum) 26 23 20 Variable operating costs per pair (S) Life of the facility (years) 2 3 4 The company's cost of capital is 10% per annum. New Shoes Company's CFO is concerned about the variability in the selling price and variable cost and their effect on the project NPV. All cash flows occur at year end. a) She wants you to conduct appropriate analysis as demonstrated in this subject's lectures. Based on your analysis, make appropriate recommendation(s) regarding these variables. Show detailed workings. b) Additionally, what (if any) are limitations of your analysis? Question 9 (7+3= 10 marks) New Shoes Company is considering a plan to manufacture shoes made from composite materials. The management has conducted market research and determined that the initial investment needed is $850,000. Additional information regarding the project is provided in the table below: Estimates Item Pessimistic Best Optimistic Sales (pairs) 20,000 30,000 45,000 35 45 50 Selling price per pair (S) Fixed operating costs ($ per 85,000 75,000 65,000 annum) 26 23 20 Variable operating costs per pair (S) Life of the facility (years) 2 3 4 The company's cost of capital is 10% per annum. New Shoes Company's CFO is concerned about the variability in the selling price and variable cost and their effect on the project NPV. All cash flows occur at year end. a) She wants you to conduct appropriate analysis as demonstrated in this subject's lectures. Based on your analysis, make appropriate recommendation(s) regarding these variables. Show detailed workings. b) Additionally, what (if any) are limitations of your analysis