1. Your boss wants you to conduct a sensitivity and scenario analysis to determine whether the following project is a winner. You are entering an established market, and you know the market size will be 1,100,000 units. You are unsure of your exact market share, the price you will be able to charge, and your variable cost per unit, but have determined a range of possible values for each (in the table below). Your initial investment cost is $150 million, and that investment will depreciate in straight-line form over the 20-year life of the project. There are no new NWC requirements, and there will be no salvage value at the end of the 20 years. The tax rate is 35%. The discount rate is 18%. Use the following table to conduct a full sensitivity analysis for the project. Make sure to include the NPV for the expected outcome as part of the full sensitivity analysis. Also add the best- and worst-case scenarios to the full sensitivity analysis. Show all of your work (written out, not an Excel file). Round to the nearest dollar.

	Pessimistic	Expected	Optimistic
Market Share	4.0%	5.0%	6.0%
Price/unit	$2310	$2500	$2690
VC/Unit	$2000	$1540	$1000
FC	$1.8 Million	$2 Million	$2.2 Million

2. Using the information in Question 1, what is the break-even market share for the project? Show your work, and round to the nearest 0.01%.

3.Consider a project similar to the one in question 1, but with the following modifications (use all other information from question 1): the cash flows continue forever, and you already own the plant/property/equipment worth $150 million, but it is already fully depreciated. Calculate the expected NPV of this project, along with the best- and worst-case scenarios. Show all of your work (written out, not an Excel file). Round to the nearest dollar.

4. For the project in question 3, calculate the IRR using the expected cash flows. Show all of your work (written out, not an Excel file). Round to the nearest 0.01%.

5. You are considering a project that costs $500 to invest in today, and will pay you $100 next year. The cash inflow will grow at a constant rate of 3% per year after year 1, and you will receive cash inflows for 20 years (total including the first year CF). Your discount rate is 16%. What is the NPV of the project? Also, what would the NPV be if the cash inflows continued forever? Show your work.