1. You are planning to manufacture a new high tech toaster. It will cost you $3 million to develop and you plan to manufacture for three years with straight line depreciation to zero. Due to the rapidly changing nature of toaster technology you do not wish to plan any more than three years ahead. Competition is fierce and you have estimated your expenses and sales etc as per the following with estimates for changes in good or bad scenarios.

1. Market size 1 million ± 12%
2. Market share 0.25 ± 10%
3. Unit Price $20 ± 15%
4. Variable c.p.u. $10 ± 12%
5. Fixed costs $ 500,000 ± 15%

Your cost of capital is 7%.

Create a table of estimated, and pessimistic values for each element. What is the three year NPV of the project with all values pessimistic? Do you think that this should go ahead and why? (15)