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Unformatted text preview: have the greatest impact on profitability, and this helps management focus its attention on those variables that are probably most important. k. Assume that Sidney Johnson is confident of her estimates of all the variables that affect the projects cash flows except unit sales and sales price: if product acceptance is poor, unit sales would be only 900 units a year and the unit price would only be $160; a strong consumer response would produce sales of 1,600 units and a unit price of $240. Sidney believes that there is a 25 percent chance of poor acceptance, a 25 percent chance of excellent acceptance, and a 50 percent chance of average acceptance (the base case). k. 1. What is scenario analysis? Answer: Scenario analysis examines several possible situations, usually worst case, most likely case, and best case. It provides a range of possible outcomes....
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- Spring '08