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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

If sensitivity of NPV against Market Size is 0.6637, then when market size change from 10,000 to 12,000, what is new NPV?

Multiple Choice

  • NPV new= 10,000+ 0.6637*(12000-10000)

  • NPV new= 0.6637*(12000-10000)

  • NPV new= 1517+ 0.6637*(12000-10000)

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