After completing a scenario analysis for a prospective investment, the CFO of a company reported to the

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After completing a scenario analysis for a prospective investment, the CFO of a company reported to the CEO that there is a 60 percent chance the investment will provide the firm with a net present value (NPV) equal to $128,300, there is a 25 percent chance the investment’s NPV will be $185,400, and there is a 15 percent chance the NPV will be 2$77,600. The CEO will not purchase investments that have coefficients of variation greater than 0.7. Should the CEO purchase the investment?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
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CFIN

ISBN: 978-1305666870

5th edition

Authors: Scott Besley, Eugene Brigham

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