Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 1 a. Risk of project A is analyzed by Monte Carlos simulation techniques with Crystal Ball software. The results from Crystal Ball show that

image text in transcribed
Question 1 a. Risk of project A is analyzed by Monte Carlos simulation techniques with Crystal Ball software. The results from Crystal Ball show that Net Present Value (NPV) of project A is followed a normal probability distribution with parameters as follows: . Expected value of NPV of project A is 40 million VND . Standard deviation of NPV of project A is 30 million VND a.l. Determine the probability that the NPV of project A is less than zero a.2. Should you invest in project A? Give brief reason for your decision. b. Risk of project B is analyzed by Monte Carlos simulation techniques with Crystal Ball software. The results from Crystal Ball show that Net Present Value (NPV) of project B is followed a normal probability distribution with parameters as follows: . Expected value of NPV of project B is 40 million VND . Standard deviation of NPV of project B is 25 million VND b.1. Determine the probability that the NPV of project B is positive b.2. Should you invest in project A or B? Give brief reason for your decision. Question 2 An investor intends to buy a barrel of oil today and sell in a year time. Today's price PO is certain $75. Next year's price P1 is uncertain. Assume P1 is followed Normal distribution with average value of $90 and standard deviation of $15. Assume a discount rate required by investor is 8%/year. a. What is the probability, that the P1 is lower than 90? b. What is expected value of NPV of buying a barrel? c. What is standard deviation of NPV of buying a barrel? d. What is the probability, that the NPV of buying a barrel is less than zero

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

Linear Algebra with Applications

Authors: Steven J. Leon

7th edition

131857851, 978-0131857858

More Books

Students also viewed these Mathematics questions