Orange Pty Ltd is considering to invest in a new artificial inteligence product. Below is the estimates, plus or minus 80%, associated with this new project:

• Unit price: $1,700
• Variable costs per unit: $500
• Fixed costs: $2,000,000 per year
• Expected sales: 10,000,000 per year

Assume hat this new product line will require an initial outlay of $2 million to be invested in non-depreciating assets, with no working capital investment. Tax rate is 30% in its project analyses.

1. Calculate the projects FCF and NPV under each of the following sets of assumptions: (1) the best-case scenario, (2) the base case using expected values, and (3) the worst-case scenario for one year from now. Consider discount rate to be 40%. (2 marks for each scenario FCF and NPV)
2. Explain your assessment of the investments potential and risk. At least four key concepts to be included in your discussion.