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11.23 Consider an investment with the following projected cash flows: E(A) Var(A) -$2,500 100 1 $2,200 200 2 $1,800 300 The distributions are assumed to
11.23 Consider an investment with the following projected cash flows: E(A) Var(A) -$2,500 100 1 $2,200 200 2 $1,800 300 The distributions are assumed to be independent of each other. (a) Compute the mean of the NPW at i = 10%. Using just the mean value, would the investment be accepted? (b) Compute the standard deviation of the NPW distribution. (c) Compute the two standard deviations below the mean. If these cash flows are normally distributed with the means and variances as previously speci- fied, what is the probability that the actual NPW will fall 20 below the mean? 11.23 Consider an investment with the following projected cash flows: E(A) Var(A) -$2,500 100 1 $2,200 200 2 $1,800 300 The distributions are assumed to be independent of each other. (a) Compute the mean of the NPW at i = 10%. Using just the mean value, would the investment be accepted? (b) Compute the standard deviation of the NPW distribution. (c) Compute the two standard deviations below the mean. If these cash flows are normally distributed with the means and variances as previously speci- fied, what is the probability that the actual NPW will fall 20 below the mean
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