Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes...

80.2K

Verified Solution

Question

Finance

Huang Industries is considering a proposed project whoseestimated NPV is $12 million. This estimate assumes that economicconditions will be "average." However the CFO realizes thatconditions could be better or worse, so she performed a scenarioanalysis and obtained these results:
Economic Scenario Probability of Outcome NPV
Recession 0.05 - $74 million
Below average 0.20 - $28 million
Average 0.50 12 million
Above average 0.20 18 million
Boom 0.05 26 million
Calculate the project's expected NPV, standard deviation, andcoefficient of variation. Enter your answers for the project'sexpected NPV and standard deviation in millions. For example, ananswer of $13,000,000 should be entered as 13. Do not roundintermediate calculations. Round your answers to two decimalplaces.
E(NPV): $ million
?_NPV: $ million
CV:

Answer & Explanation Solved by verified expert

4.5 Ratings (1122 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Huang Industries is considering a proposed project whoseestimated NPV is $12 million. This estimate assumes that economicconditions will be "average." However the CFO realizes thatconditions could be better or worse, so she performed a scenarioanalysis and obtained these results:Economic ScenarioProbability of OutcomeNPVRecession0.05- $74 millionBelow average0.20- $28 millionAverage0.5012 millionAbove average0.2018 millionBoom0.0526 millionCalculate the project's expected NPV, standard deviation, andcoefficient of variation. Enter your answers for the project'sexpected NPV and standard deviation in millions. For example, ananswer of $13,000,000 should be entered as 13. Do not roundintermediate calculations. Round your answers to two decimalplaces.E(NPV): $ million?NPV: $ millionCV:

Economic Scenario	Probability of Outcome	NPV
Recession	0.05	- $74 million
Below average	0.20	- $28 million
Average	0.50	12 million
Above average	0.20	18 million
Boom	0.05	26 million