Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

TASK 3 Project Risk Analysis 3. Duqm Chemical Company is contemplating to invest in a new project which costs RO 100,000. The expected cash flow

image text in transcribed

TASK 3 Project Risk Analysis 3. Duqm Chemical Company is contemplating to invest in a new project which costs RO 100,000. The expected cash flow on this project under various scenarios are given below: State of Economy Recession Growth Boom Probability 0.3 0.5 0.2 End of year 1 (RO) 50,000 75,000 100,000 End of Year 2 (RO) 75,000 100,000 150,000 Assume that the state of the economy will be the same in the second year as in the first. The required rate of return is 8%. There is no tax or inflation. Required: 1. Calculate Expected NPV (3 Marks) 2. Calculate the Standard Deviation of NPV (4 Marks) 3. Appraise the management about this project with your comments. (1 Marks) 4. Why we need to analyse the project risk at the time of evaluating capital budgeting. (2 Marks). (TOTAL 10 MARKS)

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 Business Competing In The Global Marketplace

Authors: Charles Hill

14th Edition

1260387542, 9781260387544

More Books

Students also viewed these Finance questions

Question

Appreciate important legal implications of performance appraisals

Answered: 1 week ago