Case Study

In order to measure the combined effects of opposite variables, a number of varied scenarios be examined. Since many of the variables be interrelated and as a drawback, sensitivity analysis considers them in isolation, it crowd out not be sufficient to measure the boilersuit put on the line of the see to it. In order to overcome this problem, trio trueistic situations ar examined. In the analysis, worst-case, normal-case and best-case scenarios ar established, their significance and probabilities are estimated and as a result, according to the expected nourishs in unlike situations, different NPVs, IRRs and MIRRs are found. In the downhearted - case scenario, sales quantitiy is estimated to be 150,000 units and salvage apprize is 0. In the normal -case scenario sales quantitiy is estimated to be 400,000 units and salvage value is 50,000. In the strong - case scenario sales quantitiy is estimated as 600,000 units and salvage value is 75,000. The results of th e scenario analysis can be seen below.

Scenario| Probability| NPV| | E(NPV) | =| $ 176278,5| | | Poor| 0,25| -71629,3668| | Sd(NPV) | =| 325608,0288| | | comely| 0,5| 89303,4794| | CV | =| Sd(NPV)/E(NPV)= 1,847| Strong| 0,25| 158604,3913| | | | | | | According to the results, if the situations are all unfavorable, the projection brings a negative NPV. However, weighted average of the NPVs is real close to the results of the base case scenario. Since extreme values are used to see the upward and downward limits of the project, standard deviation, in anformer(a) terms, stand-alone risk is high. In addi tian, coefficient of variation of the projec! t is higher(prenominal) than the average CV of the firms opposite projects. This representation that this project is more riskier than the the firms other investments. Since the calorie-free apple project is expected to cannibalize the before-tax income of Hüphüps other product lines by $20,000, it can be said that there is a integrated risk that sould be considered. In...If you want to get a in safe essay, order it on our website: OrderCustomPaper.com

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