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I can calculate the answer for the sensitivity analysis but I dont understand why did the scenario question also included “……there is a 15% chance that the Milland will have negative cqsh flows for year 1 of $1,000,000 or more.”
I read through the answer about that part but still could not understand what do they want us to write, after finished calculating sensitivity of the selling price
The selling price is only one of the factors that might change. So it is sensible to write (as the examiner has done in his answer) that they will take into account not just the sensitivity of the selling price but the 15% chance referred to in the question.
(Although do remember that the examiner always writes far more in his answers then he expects students to write in the exam. You would certainly never be expected to write all that he has done for this part given that there are only 2 or the 5 marks for the discussion!!)
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