A project starts with an initial capital outflow of RM450,000 in exchange for the following likely cash flows: State of Economy Probability End of Year 1 (RM) End of Year 2 (RM) Recession 18% 150,000 250,000 Normal 60% 350,000 450,000 Boom 22% 550,000 100,000 Assume that the economy will be in the same condition in the second year as it was in the first. The discounted rate of return is 15 percent. There is no taxation or inflation. State of Economy Prob NPV NPV * Prob (Prob x (NPV – eNPV)2 R 18% (130,529.30) N 60% 194,612.48 B 22% 103,875.24 Expected NPV (eNPV) ? Variance of NPV ? Standard Deviation of NPV ? Please give to calculation
A project starts with an initial capital outflow of RM450,000 in exchange for the following likely cash flows: State of Economy Probability End of Year 1 (RM) End of Year 2 (RM) Recession 18% 150,000 250,000 Normal 60% 350,000 450,000 Boom 22% 550,000 100,000 Assume that the economy will be in the same condition in the second year as it was in the first. The discounted rate of return is 15 percent. There is no taxation or inflation. State of Economy Prob NPV NPV * Prob (Prob x (NPV – eNPV)2 R 18% (130,529.30) N 60% 194,612.48 B 22% 103,875.24 Expected NPV (eNPV) ? Variance of NPV ? Standard Deviation of NPV ? Please give to calculation
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 14P
Related questions
Question
- A project starts with an initial capital outflow of RM450,000 in exchange for the following likely cash flows:
|
State of Economy |
Probability |
End of Year 1 (RM) |
End of Year 2 (RM) |
|
Recession |
18% |
150,000 |
250,000 |
|
Normal |
60% |
350,000 |
450,000 |
|
Boom |
22% |
550,000 |
100,000 |
Assume that the economy will be in the same condition in the second year as it was in the first. The discounted
|
State of Economy |
Prob |
NPV |
NPV * Prob |
(Prob x (NPV – eNPV)2 |
|
R |
18% |
(130,529.30) |
|
|
|
N |
60% |
194,612.48 |
|
|
|
B |
22% |
103,875.24 |
|
|
|
Expected NPV (eNPV) |
? |
|
||
|
Variance of NPV |
? |
|||
|
Standard Deviation of NPV |
? |
Please give to calculation
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,