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
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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- 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
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