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 |
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
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NPV new= 10,000+ 0.6637*(12000-10000)
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NPV new= 0.6637*(12000-10000)
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NPV new= 1517+ 0.6637*(12000-10000)
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