Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 NPV
Recession 0.05 ($84 million)
Below average 0.20 (18 million)
Average 0.50 12 million
Above average 0.20 22 million
Boom 0.05 30 million

Calculate the project's expected NPV, standard deviation, and coefficient of variation. Enter your answers for the project's expected NPV and standard deviation in millions. For example, an answer of $13,000,000 should be entered as 13. Do not round intermediate calculations. Round your answers to two decimal places.

E(NPV): million
NPV: million
CV:

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions