Qingdao Manufacturing Ltd is considering two competing projects. Details are as follows:

● Project A has a 0.9 probability of producing a negative NPV of £200,000 and a 0.1 probability of producing a positive NPV of £3.8m.

● Project B has a 0.6 probability of producing a positive NPV of £100,000 and a 0.4 probability of producing a positive NPV of £350,000.

What is the expected net present value of each project?

If management is to agree to the investment of funds in a project, there must be a proper screening of each proposal. For larger projects, this will involve providing answers to a number of questions, including:
● What are the nature and purpose of the project?