The Net Present Value (NPV) and Probability distribution for the Project X of a company are: NPV Estimate Probability 30,000 0.1 60,000 0.4 1,20,000 0.4 1,50,000 0.1 O a. 75,000 O b. 1,00,000 O c. 90,000 O d. 35,000

The Net Present Value (NPV) and Probability distribution for the Project X of a company are: NPV Estimate Probability 30,000 0.1 60,000 0.4 1,20,000 0.4 1,50,000 0.1 O a. 75,000 O b. 1,00,000 O c. 90,000 O d. 35,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 4P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

The Net Present Value (NPV) and Probability distribution for the Project X of a company are:

NPV Estimate Probability

30,000

0.1

60,000

0.4

1,20,000

0.4

1,50,000

0.1

O a. 75,000

O b. 1,00,000

O c. 90,000

O d. 35,000

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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