In 2018, Koaka Koala Corporation is considering to extend their business to the petroleum industry as new crude oil field is accidentally found. They are planning to produce and sell crude oil for 5 years. Koaka Koala will need to invest $55 million in fixed assets for exploring and refining crude oil. The fixed assets will have zero salvage value and straight-line depreciation will be applied. Sales are projected at 1 million barrels per year; price per barrel is projected at $55; variable cost per barrel is projected at $0.1; and fixed cost is projected at $5 million. Koaka Koala has a required return of 15% and the tax rate is 35%. For simplicity, assume there will be no change in net working capital.

(a) After consulting some experts, Koaka Koala is confident that the projections of barrels sold, price per barrel, variable cost per barrel, and fixed cost are accurate within 10%. What are the base-case, worst-case, and best-case scenarios NPV? (10 points)

(b) What is the sensitivity of NPV to changes in price per barrel? (10 points)

(c) What are the accounting break-even quantity, cash break-even quantity, and financial break-even quantity (ignoring taxes)? (10 points)