Roderick Electric Scooter, Inc., staff has come up with the following estimates for the electric scooter project:
Pessimistic Expected Optimistic
Market size 2.5 million 3.0 million 3.2 million
Market share 0.4 0.1 0.16
Unit price $300 $375 $400
Unit variable cost $350 $300 $275
Fixed cost $5 million $3million $1million
Conduct sensitivity analysis. What are the principal uncertainties in the project? Assume an initial investment of $16 million to be depreciated over a period of 10 years to a salvage value of zero. Corporate Tax rate is 34%. Assume a cost of capital of 10%.