Perform a scenario analysis with data provided

Assume that your selected company(Amcor Company) is considering a potential project with a new product that is

expected to sell for an average price of $25 per unit and the company expects it can sell 450 000

unit per year at this price for a period of 4 years. Launching this project will require purchase of a

$2 500 000 equipment that has residual value in four years of $500 000 and adding $ 800 000 in

working capital which is expected to be fully retrieved at the end of the project. Other information

is available below:

Depreciation method: straight line

Variable cost per unit: $15

Cash fixed costs per year $450 000

Discount rate: 12%

Tax Rate: 30%

Do a scenario analysis with cash flows of the assumed project to determine the sensitivity of the

project's NPV to different scenarios that are defined in terms of the estimated values for each of

the project's value drivers. Please work on two scenarios corresponding to the worst- and best-

case outcomes for the project. You need to provide your results in (a) relevant tables:

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HI5002 Finance For Business Group Assignment

Worst case: Unit sales decrease by 20%; price per unit decreases by 20%; variable cost per unit

increases by 20 %; cash fixed cost per year increases by $100 000

Best case: Unit sales increase by 20%; price per unit increases by 20%; variable cost per unit

decreases by 20%; cash fixed cost per year decreases by $100 000

Based on the scenario analysis outcome, draw relevant conclusion about project NPV's sensitivity.