Problem:
Sensitivity Analysis NPV Question
A project has an initial investment of $200.00. You have come up with the following estimates of the projects with cash flows.
Pessimistic NPV Most Likely Optimistic
Revenues 30 40 50
Costs -20 -16 -10
If the cash flows are perpetuities and the cost of capital is 10%. What does a sensitivity analysis of NPV (no taxes) show? Please show step-by-step computations. Thanks!
BTW. As you are probably well aware, there is an answer for each (Pessimistic, Most Likely and Optimistic).