3. The Yummy Bread Company recently includes new machine to process and produce the own brand croissant (This new machine does not replace other existing machines as this machine is the part of new product line expansion project and install on the extra space of the existing factory). The new equipment costs, including installation and set-up cost, $5 million. The CCA rate applied in this machine is 30%. However, as the following table shows, there is some uncertainty both about yearly future sales and associated various types of cost. We assume that there is no growth on yearly sales and cost of goods sold: Parameters Worst case Base case Sales 2.5 Cost of goods sold Administration costs 0.1 0.1 Increase of net working capital Project lifespan (years) 12 Corporate tax rate 35% 30% Cost of capital L 13% 10% (Sales or costs unit: $ Million) Best case 3.5 1.7 0.1 0.5 1.5 7 17 25% 7% We also assume that the increase of net working capital only incurs in year 1. No matter how long the lifespan of this project is, the amount of asset disposal is always equal to undepreciated capital cost amount applied on the subsequent year. a. Conduct break-even analysis on this project. (excluding the parameters on Ad- ministration costs, increase of net working capital, and duration of project) b. Conduct sensitivity analysis on this project (excluding the parameters on Admin- istration costs, increase of net working capital, and duration of project) c. Conduct scenario analysis on this project based on each three cases. d. Let's assume that the assigned probabilities on each of the case is same and independent across six variables. Specifically, the probability the worst case occurs is 25%, the probability the base case occurs is 40%, and the probability the best case occurs is 35%. Conduct the Monte Carlo simulation analysis with the number of replicates 100,000. Estimate the expected NPV and the standard deviation of NPV. What is the probability that NPV will be positive? 3. The Yummy Bread Company recently includes new machine to process and produce the own brand croissant (This new machine does not replace other existing machines as this machine is the part of new product line expansion project and install on the extra space of the existing factory). The new equipment costs, including installation and set-up cost, $5 million. The CCA rate applied in this machine is 30%. However, as the following table shows, there is some uncertainty both about yearly future sales and associated various types of cost. We assume that there is no growth on yearly sales and cost of goods sold: Parameters Worst case Base case Sales 2.5 Cost of goods sold Administration costs 0.1 0.1 Increase of net working capital Project lifespan (years) 12 Corporate tax rate 35% 30% Cost of capital L 13% 10% (Sales or costs unit: $ Million) Best case 3.5 1.7 0.1 0.5 1.5 7 17 25% 7% We also assume that the increase of net working capital only incurs in year 1. No matter how long the lifespan of this project is, the amount of asset disposal is always equal to undepreciated capital cost amount applied on the subsequent year. a. Conduct break-even analysis on this project. (excluding the parameters on Ad- ministration costs, increase of net working capital, and duration of project) b. Conduct sensitivity analysis on this project (excluding the parameters on Admin- istration costs, increase of net working capital, and duration of project) c. Conduct scenario analysis on this project based on each three cases. d. Let's assume that the assigned probabilities on each of the case is same and independent across six variables. Specifically, the probability the worst case occurs is 25%, the probability the base case occurs is 40%, and the probability the best case occurs is 35%. Conduct the Monte Carlo simulation analysis with the number of replicates 100,000. Estimate the expected NPV and the standard deviation of NPV. What is the probability that NPV will be positive