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Economic Scenario Probability of Outcome NPV Recession ($70 million) (25 million) 12 million 20 million 30 million 0.05 Below average Average Above average 0.20 0.50 0.20 Boom 0.05

Economic Scenario Probability of Outcome NPV Recession ($70 million) (25 million) 12 million 20 million 30 million 0.05 Below average Average Above average 0.20 0.50 0.20 Boom 0.05

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Huang Industries is considering a proposed project whose estimated
NPV is $12 million. This estimate assumes that economic conditions will be “average.”
However, the CFO realizes that conditions could be better or worse, so she performed a
scenario analysis and obtained these results:

Calculate the project’s expected NPV, standard deviation, and coefficient of variation.

Economic Scenario Probability of Outcome NPV Recession ($70 million) (25 million) 12 million 20 million 30 million 0.05 Below average Average Above average 0.20 0.50 0.20 Boom 0.05
Transcribed Image Text:Economic Scenario Probability of Outcome NPV Recession ($70 million) (25 million) 12 million 20 million 30 million 0.05 Below average Average Above average 0.20 0.50 0.20 Boom 0.05
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