Question
Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be average. However, the CFO
Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be average. However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results: Economic Scenario Probability of Outcome Recession 0.05 Below average 0.20 Average 0.50 Above average 0.20 Boom 0.05 NPV ($70 million) (25 million) 12 million 20 million 30 million Calculate the projects expected NPV, standard deviation, and coefficient of variation.
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