Principles of Corporate Finance

Sensitivity Analysis

Example - continued

Possible Outcomes

Fixed Cost 4 bil 3 bil 2 bil

Unit Var Cost 360,000 300,000 275,000

Unit price 350,000 375,000 380,000

Market Share .04 .1 .16

Market Size .9 mil 51 mil 1.1 mil

Variable Pessimistic Expected Optimistic

Range