Case Study

In order to measure the combined effects of pivotal 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 croup not be sufficient to measure the overall take chances of the see to it. In order to overcome this problem, ternary echtistic situations ar examined. In the analysis, worst-case, normal-case and best-case scenarios are established, their significance and probabilities are estimated and as a result, according to the expected nourishs in various situations, different NPVs, IRRs and MIRRs are found. In the pitiable - case scenario, sales quantitiy is estimated to be 150,000 units and salvage apprise 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 the scenari o analysis can be seen below.

Scenario| Probability| NPV| | E(NPV) | =| $ 176278,5| | | Poor| 0,25| -71629,3668| | Sd(NPV) | =| 325608,0288| | | honest| 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 project 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 additian, coeffi cient of variation of the project is high t! han the average CV of the firms opposite projects. This fashion that this project is more riskier than the the firms other investments. Since the promiscuous 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 wide essay, order it on our website: OrderCustomPaper.com

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