Assume that Sidney Johnson is confident of her estimates of all the variables that affect the project's cash flows except unit sales and sales price: If product acceptance is poor, unit sales would be only 800 units a year and the unit price would only be $160; a strong consumer response would produce sales of 1,200 units and a unit price of $240. Sidney believes that there is a 25% chance of poor acceptance, a 25% chance of excellent acceptance, and a 50% chance of average acceptance (the base case). 1.) What is scenario analysis? 2.) What is the worst-case NPV? The best-case NPV? 3.) Use the worst-,base-, and best-case NPV's and probabilities of occurrence to find the project's expected NPV, as well as the NPV's standard deviation and coefficient of variation
Assume that Sidney Johnson is confident of her estimates of all the variables that affect the project's
1.) What is scenario analysis?
2.) What is the worst-case
3.) Use the worst-,base-, and best-case NPV's and probabilities of occurrence to find the project's expected NPV, as well as the NPV's standard deviation and coefficient of variation
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