=+b Calculate the standard deviation of NPV.

10 (Examination level) RJW plc is a quoted firm which operates ten lignite mines in Wales. It has total assets of £50m and the value of its shares is £90m. RJW ple's direc-

tors perceive a great opportunity in the UK government's privatisation drive. They have held preliminary discussions with the government about the purchase of the 25 lignite mines in England. The purchase price suggested by the Treasury is £900m.

For two months the directors have been engaged in a fund-raising campaign to per-

suade City financial institutions to provide £500m of new equity capital for RJW and

£400m of fixed interest rate debt capital in the form of bank loans.

You are a senior analyst with the fund management arm of Klein-Ben Wensons and last week you listened attentively to RJW's presentation. You were impressed by their determination, acumen and track record but have some concerns about their figures for the new project.