Scenarios and sensitivity

The base case should be the most defensible current expectation, not a compromise between optimism and pessimism. The downside should combine plausible adverse conditions relevant to the project: lower volume or utilization, delayed opening, slower ramp-up, lower price or funding, higher payroll or construction cost, and unexpected working-capital needs. The upside tests opportunity without becoming the approval justification.

Use broad income/expense multipliers for quick screening, then use line-item adjustments for decision-critical drivers. State the rationale and period for every material adjustment. A downside that leaves income higher and costs lower than the base is not a meaningful stress test.

Compare funding gap, reserve breaches, cash low point, ending cash, operating break-even, payback, NPV, ROI, IRR availability, and margin across scenarios. A project may have positive NPV yet fail because the downside funding gap is unaffordable. Conversely, a short cash deficit may be manageable if committed funding and conditions are documented.

Sensitivity asks which assumption changes the decision and at what point. Change one driver at a time to find thresholds, then combine correlated drivers in scenarios. Advanced probabilistic or Monte Carlo analysis may be useful when reliable ranges and dependency assumptions exist, but it should be an additional layer, not a substitute for an understandable base cash flow.