A company is starting a project that has a Net Present Value  (NPV) of $200,000.00 ; however, given the uncertainty that exists in the market context of the investment that is about to be made, the above value is simply the expected value, and it is estimated that the NPV will be known with greater certainty at the end of the year. If the market evolution is favourable for the project, the NPV will increase by 25%, while if the market does not respond favorably, the NPV will be reduced by 20%.

 Calculate the NPV at time 1, i.e. at the end of the year.

Calculate the NPV for the unfavorable scenario.

Answer rating: 100% (QA)

To calculate the NPV at the end of the year we need to apply th... View the full answer