Question
Your team has identified several key aspects for the project. The following table shows the base-case assumptions, together with the best case and worst case.
Your team has identified several key aspects for the project. The following table shows the base-case assumptions, together with the best case and worst case. Parameter Initial Assumption Worst Case Best case First-year sales (as a percentage of the total revenues in the latest reporting period) 7% 4% 10% Revenue growth rate 15% for the second year, 10% for the third, and 5% annually for the final two years Constant after the first year at a rate of 0% Constant after the first year at a rate of 15% Project's EBITDA/Sales profit margin Similar to existing projects +5% to the initial assumption -5% to the initial assumption Net Working Capital $25,000,000 $35,000,000 $15,000,000 The estimated beta The upper bound of 95% confidence interval The lower bound of the 95% confidence interval (a) Perform break-even analysis with respect to the first-year sales parameter. (b) Perform sensitivity analysis for each parameter. Evaluate which parameter is the most important to the project
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