12. A company has a possible project and has identified the two major areas of risk as being the inflation and the movement in world oil prices. It has calculated various possible NPVs as follows: Oil price change Decrease Unchanged Increase Demand Probability 0.1 0.3 0.6 Low 0.2 £2m £1m -£4m Medium 0.3 £3m £2m -£1m High 0.5 £6m £5m £2m What is the probability that the project will have an NPV of exactly £2m? A) 0.36 B) 0.39 C) 0.41 D) 0.64
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12. A company has a possible project and has identified the two major areas of risk as being the inflation and the movement in world oil prices. It has calculated various possible NPVs as follows:
|
|
Oil price change |
Decrease |
Unchanged |
Increase |
|
Demand |
|
0.1 |
0.3 |
0.6 |
|
Low |
0.2 |
£2m |
£1m |
-£4m |
|
Medium |
0.3 |
£3m |
£2m |
-£1m |
|
High |
0.5 |
£6m |
£5m |
£2m |
What is the probability that the project will have an NPV of exactly £2m?
A) 0.36
B) 0.39
C) 0.41
D) 0.64
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