Scenario Analysis: The management team of Ecosneak would like to separately model the first-year (2024) profit from entering the kids market segment (Option 2, above), using scenario analysis. Assume a notional fixed cost for the first year of 20,000 (120,000/6) and a selling price of 60 per pair. Assume the variable costs for the bicycle (Purchase and Distribution) can vary between 20 and 40, with a most likely value of 32 per pair. First- year demand for the bicycle is expected to range from 8,000 to 18,000 pairs, with 13,000 units the most likely level of demand for the sneakers.

Use the information given in the case study to undertake a scenario analysis of first-year profits in the kids market. Set up the profit model and use this to calculate base-case, worst-case and best-case scenarios for first year profit.