Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 5 (20%): Sensitivity analysis were done on a refinery project. It was found that oil price & gas price are the most sensitive

image text in transcribed

Problem 5 (20%): Sensitivity analysis were done on a refinery project. It was found that oil price & gas price are the most sensitive parameters and they could change the outcome of the project financials. It was also found that the project yields an NPV of $2,000,000 based on $25 oil price and $7.5 gas price per volumetric unit. The advisers presented the following data with their report. Oil price Gas Price NPV $20 $6.5 $1,200,000 $30 $8.5 $3,000,000 $20 $8.5 $1,500,000 $30 $6.5 $2,300,000 Oil price Probability $20 60% $30 Gas price $6.5 55% $8.5 Calculated the expected NPV. Comment on the results

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Recommended Textbook for

International Financial Management

Authors: Geert Bekaert, Robert J. Hodrick

2nd edition

013299755X, 132162768, 9780132997553, 978-0132162760

More Books

Students also viewed these Finance questions