b. Complete Table 1, assuming initially that the project has average risk. Then develop
        a new table which shows a sensitivity analysis of NPV to sales quantity, salvage
        value, and the cost of capital. Assume that each of these variable can deviate from
        its base case, or expected value, by plus or minus 10 percent, 20 percent, and 30
        percent. See Table 2 for partial results.
 c. sensitivity diagram and discuss the results.
   d. What are the primary weaknesses of sensitivity analysis? What are its primary
3. Complete the scenario analysis initiated in Table 3. What is the worst case NPV? The
    best-case NPV? Use the worst-case, most likely , and best-case NPVs, and their
    probabilities of occurrence, to find the project’s expected NPV, standard deviation,
    and coefficient of variation.
4. What are the primary advantages and disadvantages of scenario analysis?
6. a. Would the lite orange juice project be classified as high risk, average risk, or low
       risk by your analysis thus far? (Hint: Consider the project’s coefficient of variation
       of NPV.) What type of risk have you been measuring?
 b. What do you think the project’s corporate risk would be, and how could you
       measure it?
   c. How would it affect your risk assessment if you were told that the cash flows from
       this project were totally uncorrelated with Indian River’s other cash flows? What of


"Is this question part of your assignment? We Can Help!"

Essay Writing Service