Question
When Elon Musks firm was estimating the expected NPV from providing customers with space travel, the financial analyst assumed the revenue in year 1 of
When Elon Musks firm was estimating the expected NPV from providing customers with space travel, the financial analyst assumed the revenue in year 1 of operations would equal $1.2 billion. Given all of her other assumptions, the expected NPV turned out to equal $13.8 billion and, therefore, the CFO was planning to recommend the investment. Before a final decision was made, a senior financial analyst applied break even analysis based on the forecasted revenue in year 1 and it turned out that if revenue in year 1 dropped from $1.2 billion to 1.0 billion, the investment would break even (NPV = $0). If you were senior financial analyst, how would you interpret the results of your break even analysis and, in your opinion, how would the results impact the recommendation to invest?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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