2. (stay positive, become negative)

3. ($2.25 mil, $5.93 mil, -$0.04 mil, $0.75 mil)

4. ( 5.39, 5.18, 6.35, 5.66)

5. (-0.46, -0.84, -.043, -0.86)

6.( 32.38%, 33.26%, 26.43%, 14.46%)

4. Sensitivity and scenario analysis Different techniques for analyzing project risk require different input variables and assumptions. in the Suppose you are using the sensitivity analysis technique to evaluate project risk. You would change model to evaluate the effect of the input factors on the expected value. several input variables together Danielle is a risk analyst. She is conducting a sensitivity analysis to evaluate the riskiness of a new in. Her risk analysis report includes the sensitivity curve shown on the graph. one input variable at a time ring investing Base Case NPV- NPV Milions of dollars) Base Case Cost of Capital COST OF CAPITAL 12 if the cost of This curve implies that the project is not very sensitive to changes in cost of capital. The project's NPV is likely to capital increases to 15%. Along with the sensitivity analysis, Danielle is including a scenario analysis for the project in her report, giving the probability of the project generating a negative NPV. Her report includes the following information about the scenario analysis: Outcome Pessimistic Most likely Optimistic Data Collected NPV; Probability (P;) -$2.31 million 0.50 $4.53 million 0.35 $12.11 million 0.15 2 -1.0 -0.8 -0.6 -0.4 Probability Data for 2 0.03 0.06 0.09 0.1515 0.1446 0.1379 0.2033 0.1949 0.1867 0.2643 0.2546 0.2451 0.3336 0.3228 0.3121 Complete the missing information in Danielle's report: (Note: Round your answers to two decimal places.) The expected net present value of the project is million. Standard deviation of the net present value (the NPV of the project is likely to vary by) Assuming that probability distribution is normal, the value of z is Thus, the project has a chance to generate an NPV of less than $0