The two factors that are most critical to the success of this contract are the pattern of the exchange rates as they are a crucial determinant of the sales revenue that is generated by the project. Exchange rate fluctuations can have a severe impact on the cash inflows in terms of pounds as in this case, the costs would be incurred in pounds while the revenues would be earned in dollars. This may create a mismatch in case that the pound appreciates and the dollar appreciates which may cause a decline in the expected revenues from the contract. Thus favorable movements in exchange rates are a crucial determinant of the success of the project (Exchange rate risk, 2011).


The second factor pertains to the validity of the estimates and the judgments and it must be capable of being achieved in reality. It is to be noted that the process of discounted cash flow is based on several assumptions and any discrepancy of the same with the actual can lead the analysis ineffective. Assuming a constant discount rate over the time span can also be unrealistic as this situation is apt only when the term structure of interest rates is flat which is merely a theoretical observation and it is rarely seen in practice.