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Klott Company encounters significant uncertainty with its sales volume and price in its primary product. The firm uses scenario analysis in order to determine an

Klott Company encounters significant uncertainty with its sales volume and price in its primary product. The firm uses scenario analysis in order to determine an expected NPV, which it then uses in its budget. The base case, best case, and worse case scenarios and probabilities are provided in the table below. What is Klott's expected NPV, standard deviation of NPV, and coefficient of variation of NPV?

Probability

Unit Sales

Sales

NPV

of Outcome

Volume

Price

(In Thousands)

Worst case

0.30

6,000

$3,600

-$6,000

Base case

0.50

10,000

4,200

+13,000

Best case

0.20

13,000

4,400

+28,000

a.

Expected NPV = $35,000; sNPV = 17,500; CVNPV = 2.00.

b.

Expected NPV = $35,000; sNPV = 11,667; CVNPV = 0.33.

c.

Expected NPV = $10,300; sNPV = 12,083; CVNPV = 1.17.

d.

Expected NPV = $13,900; sNPV = 8,476; CVNPV = 0.61.

e.

Expected NPV = $10,300; sNPV = 13,900; CVNPV = 1.35.

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