But what I like to do when looking at the break even [COUGH] estimates is
gauge how much room I have at least in a partial equilibrium notion.
Because remember I'm only changing one parameter at a time and
I'm going to emphasize that again in a second.
I'm going to look at how much breathing room I have until the project turns south
or becomes negative MPV.
And so you can see these purple arrows identify parameters for
which there seems to be a fair amount of scope for error.
A large margin for error.
Take a look at the PPE liquidation value here.
I'm assuming I'm getting $0.50 on the dollar when I liquidate all of my plant
and equipment at the end of the five years.
It would take a loss of 2253% before
this thing turned negative MPV.
I'd have to be dealing with some kind of, maybe, nuclear waste, right,
something like that.
But that's not the case here.
Similarly, you know, the initial unit price,
unless we're going to price this thing at $77, just over $77 per unit.
This project is positive NPV.
This is in contrast to some of the parameters for
which there doesn't seem to be quite as much a margin for error, right?
So if I look at my initial market size,
I'm looking to the initial market size of a million units.
But if there's not a lot of enthusiasm, say a little over half a million,
this project becomes NPV negative.
Again, holding all other parameters constant.
So, this break even analysis I think is a useful tool for gauging how much room
we have one dimension at a time before the project becomes value destructive.