We conducted a sensitivity analysis on the FCFs, WACC, and terminal value to understand how changes in these variables could affect the investment decision. We varied each variable by +/-10% and recalculated the NPV.
The results of the sensitivity analysis indicate that the investment decision is highly sensitive to changes in the FCFs. A +/- 10% change in FCFs could result in a change of up to +/- $11 million in the NPV. The investment decision is moderately sensitive to changes in the discount rate, where a 10% increase in the WACC would decrease the NPV by approximately $9 million. Changes in the terminal value had a minimal effect on the investment decision.