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:

A. What are the project's expected NPV and standard deviation of NPV?
B. Should the base case analysis use the most likely NPV or expected NPV? Explain youranswer.

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Probabilit NP Probability X NPV (Expected NPV-NPV) 2XProbability 0.05 S (700,000) S (250,000) S 120,000 S 200,000 S 300,000 0.2 0.5 0.2 0.05 S (35,000) S (50,000) S 60,000 S 40,000 S 15,000 S 24,500,000,000 S 12,500,000,000 S 7,200,000,000 S 8,000,000,000 S 4,500,000,000