Assume that we can estimate a project's cash flows as follows: Expected low ECA) Estimate of Slundard Deviation o --$300 $20 1 $120 $10 2 $150 $15 $150 $20 4 $110 $25 5 $100 $30 In this case, each annual flow can be represented by a random variable with known mean and variance. Further assume complete independence among the cash flows. (a) Find the expected NPW and the variance of this project at i = 10%. (b) If all cash flows are normally distributed with the given means and variances, what is the probability that the NPW will exceed $200?
Assume that we can estimate a project's cash flows as follows: Expected low ECA) Estimate of Slundard Deviation o --$300 $20 1 $120 $10 2 $150 $15 $150 $20 4 $110 $25 5 $100 $30 In this case, each annual flow can be represented by a random variable with known mean and variance. Further assume complete independence among the cash flows. (a) Find the expected NPW and the variance of this project at i = 10%. (b) If all cash flows are normally distributed with the given means and variances, what is the probability that the NPW will exceed $200?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 2P
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Consider the given problem. If your risk-adjusted discount rate is 18%, is this project justifiable?
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