Question
Assume that Sydney Johnson is confident of her estimates of all the variables that affect the projects cash flows except unit sales and sales price.
Assume that Sydney Johnson is confident of her estimates of all the variables that affect the projects cash flows except unit sales and sales price. If product acceptance is poor, unit sales could be only approximately 800 units a year and the unit price would be set at $160. Conversely, an excellent consumer response could produce sales of 1200 units and a unit price of $240. Sidney believes that there is a 25% chance of poor acceptance, a 25% chance of excellent acceptance, and a 50% chance of average acceptance (the base case). What is the worst-case NPV? The best-case NPV? Use the worst-, base-, and best-case NPVs and probabilities of occurrence to find the projects expected NPV, standard deviation, and coefficient of variation
Use the worst-, base-, and best-case NPVs and probabilities of occurrence to find the projects expected NPV, as well as the NPVs standard deviation and coefficient of variation.
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