Task1. Kao, a centuries-old producer of toiletries and soap, had become a successful supplier of surfactants to magnetic media (floppy disk) industry in late 1970s. In 1981 the firm began to study whether it could become a player in this industry through leveraging its surfactant technology. By the end of 1986, the demand for 3.5-inch floppy disks was about 500 million units in United States, 100 million in Europe, and 50 million in Japan, with future increase rates supposed to be 40 percent per year compounded. This meant that by 1993, the global market would be approaching 3 billion disks. Of these, about one-third would be in original equipment manufacturer (OEM) market, where industry prices were anticipated to be about 180 yen (or about $1.44 at prevailing exchange rate of 125 yen to dollar on January 1, 1993) per disk.

1. Conduct a sensitivity analysis of the issues in Exhibit and find out the most imperative assumptions to this business case?

2. Select one of assumptions listed in previous problem and develop a way validate that assumption.