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The procedure in which one of the elements (or variables) affecting a project's expected value is changed to study its effect on the expected value

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The procedure in which one of the elements (or variables) affecting a project's expected value is changed to study its effect on the expected value is called analysis. a Paloma is a tisk analyst. She is conducting a sensitivity analysis to evaluate the riskiness of a new project that her company is considering investing in. Her risk analysis report includes the sensitivity curve shown on the graph Base Case NPY NOV Milions of dollars) Base Case Price 14 NPV Millions of dollars) Base Case NPV Base nce 30 24 18 12 606 12 18 24 CHANGES IN SELLING PRICE (Percent) 30 This curve imples that the project is very sensitive to changes in the price of the product. The project's NPV is likely to become negative if the price for which the product can be sold decreases by Along with the sensitivity analysis, Paloma is including a scenario analysis for the project in her report, giving the probability of the project generating a negative NPV. Her report includes the following information about the scenario analysis: Along with the sensitivity analysis, Paloma is including a scenario analysis for the project in her report, giving the probability of the p a negative NPV. Her report includes the following information about the scenario analysis: Outcome Pessimistic Data Collected NPV, Probability (P;) -$2.31 million 0.50 $4.53 million 0.35 $12.11 million 0.15 Most likely Optimistic Probability Data for z 0.03 0.06 0.09 Z -1.0 0.1515 0.1446 0.1379 -0.8 0.2033 0.1949 0.1867 -0.6 0.2643 0.2546 0.2451 -0.4 0.3336 0.3228 0.3121 Complete the missing information in Paloma's report: (Note: Round your answers to two decimal places.) million The expected net present value of the project is Standard deviation of the net present value (the NPV of the project is likely to vary by) $ Assuming that probability distribution is normal, the value of zis Thus, the project has a chance to generate an NPV of less than $0, Ch 13: Assignment - Capital Budgeting: Estimating Cash Data Collected Outcome Probability (P) Pessimistic 0.50 NPV) $2.31 million $4.53 million $12.11 million Most likely 0.35 Optimistic 0.15 Probability Data forz Z 0.03 0.06 0.09 -1.0 0.1515 0.1446 0.1379 -0.8 0.2033 0.1949 0.1867 -0.6 0.2643 0.2546 0.2451 -0.4 0.3336 0.3228 0.3121 Complete the missing information in Paloma's report: (Note: Round your answers to two decimal places.) million The expected net present value of the project is Standard deviation of the net present value (the NPV of the project is likely to vary by) 5. Assuming that probability distribution is normal, the value of 2 is Thus, the project has a chance to generate an NPV of less than 0

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