Question
The follow two table displays the list of variables under three cases:Pessimistic, Expected and Best. Top table lists valule of variables, and bottom lists NPV
The follow two table displays the list of variables under three cases:Pessimistic, Expected and Best.
Top table lists valule of variables, and bottom lists NPV of the change of that one variable, while holding the rest of varaibles at the value under expected case.
For example, NPV of "-$1,892" is computed using market size changed to "pessimistic" (5000), while the rest of variable all kept under expected case (for example market share 30%, price 2 etc).
| Variable | Pessimistic | Expected | Best |
| Market Size | 5,000 | 10,000 | 20,000 |
| Market share | 20% | 30% | 50% |
| Price | 1.9 | 2.0 | 2.2 |
| Variable cost | 1.2 | 1.0 | 0.8 |
| Fixed cost | 1,891 | 1,791 | 1,741 |
| Initial Investment | 1,900 | 1,500 | 1,000 |
| Variable\NPV | Pessmistic | Expected | Best |
| Market Size | - $1,802 | $1,517 | $8,154 |
| Market Share | -696 | 1,517 | 5,942 |
| Price | 853 | 1,517 | 2,844 |
| V.C. | 189 | 1,517 | 2,844 |
| F.C. | 1295 | 1,517 | 1,628 |
| Initial investment | 1208 | 1,517 | 1903 |
Based on this table, the NPV of the project is most sensitive to which of the following variable?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started