You want to enter the motor mower market and you have made the following predictions for the next five years:

Market share	30%	Initial Investment	$100,000
Market size p.a. (units)	10,000	Company Tax Rate	36%
+VC per unit	$100	Depn Expense	$20,000pa
FC	$90,000	Life	5 years
Sale Price / unit (P)	$210	RRR	10%

You now want to consider the sensitivity of the different variables involved and have determined the worst case / best case / expected outcomes as shown in the table below:

	Pessimistic	Expected	Optimistic
Market share	20%	30%	40%
Market size p.a. (units)	5000	10,000	15,000
+VC per unit	$150	$100	$90
FC	$100,000	$90,000	$80,000
Price per unit	$190	$210	$250
Initial investment	$150,000	$100,000	$80,000

Determine the annual cash flows for each case.

Calculate NPV of each case @ 10% discount rate

Determine the effect of changing one or more of the variables– for example:

The outcome is as expected but the initial cost is greater (pessimistic)

The outcome is as expected but the market size is smaller (pessimistic)?

Try a few more combinations of your choice

iv. Would you go ahead with the project?