Question: [10 Marks] Question 6 Talbot Industnes is considering a proposed project for its capital budget The company estimates the project's NPV IS R12 million This
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[10 Marks] Question 6 Talbot Industnes is considering a proposed project for its capital budget The company estimates the project's NPV IS R12 million This estimate assumes that the economy and market conditions will be average over next few years The company's CFO, however, forecasts there is only a 50% chance that the economy will be average Recognising this uncertainty, she has also performed the following scenario analysis Economic Scenario NPV Probability of Outcome 0 05 Recession -R70 million Below Average 0 20 -25 million Average 0 50 12 million Above average 0 20 20 million Boom 0 05 30 million Required: What are the project's 61 Expected NPV 62 Standard deviation, and 63 Coefficient of variance? (3)
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