Question
ABC Co is a company with 15 years of experience and currently implementing project A with expected NPV of 155000 USD and standard deviation of
ABC Co is a company with 15 years of experience and currently implementing project A with expected NPV of 155000 USD and standard deviation of 40000 in its operations. Now the company is thinking of implementing an additional project and considering to invest 40% of its resources into it and to choose between projects B and C. These two projects have the following expected probabilities for NPV Project B Project C NPV Probability NPV Probability 135000 0,3 157800 0,35 155000 0,4 147523 0,45 -15000 0,3 -20000 0,2 And also the correlation coefficient between the projects ar as follows: Correlation coefficients: A&B A&C 0,21 -0,15 What will your recommendation be if the company's policy is to create lower risk portfolio of projects?
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