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
Selling price per pair ($)	35	45	50
Fixed operating costs ($ per annum)	85,000	75,000	65,000
Variable operating costs per pair ($)	26	23	20
Life of the facility (years)	2	3	4

The companys cost of capital is 10% per annum. New Shoes Companys 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.

1. She wants you to conduct appropriate analysis as demonstrated in this subjects lectures. Based on your analysis, make appropriate recommendation(s) regarding these variables. Show detailed workings.
2. Additionally, what (if any) are limitations of your analysis?