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The managers of Merton Medical Clinic are analyzing a proposed project. The project's most likely NPV is $120,000, but, as evidenced by the following NPV
The managers of Merton Medical Clinic are analyzing a proposed project. The project's most likely
NPV is $120,000, but, as evidenced by the following NPV distribution, there is considerable risk
involved:
Probability NPV
0.05 -$700,000
0.2 -$250,000
0.5 $120,000
0.2 $200,000
0.05 $300,000
a.) What are the project's expected NPV and standard deviation of NPV?
b.) Compute the CV?
c.) Should the base case analysis use the most likely NPV or expected NPV? Explain your answer.
Please explain your answer and show your work so I can understand this. Thanks!
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