(11–11)

Scenario Analysis Shao Industries is considering a proposed project for its capital budget. The company estimates the project’s NPV is $12 million. This estimate assumes that the economy and market conditions will be average over the next few years. The company’s CFO, however, forecasts there is only a 50% chance that the economy will be average. Recognizing this uncertainty, she has also performed the following scenario analysis:

Economic Scenario Probability of Outcome NPV Recession 0.05 −$70 million Below average 0.20 −25 million Average 0.50 12 million Above average 0.20 20 million Boom 0.05 30 million What is the project’s expected NPV, its standard deviation, and its coefficient of variation?