Different techniques for analyzing project risk require different input variables and assumptions.

The procedure in which a set of key elements affecting the expected value are changed to study the effect on the expected value is calledsensitivity analysis.

Zhi is a risk analyst. She is conducting a sensitivity analysis to evaluate the riskiness of a new project that her company is considering investing in. Her risk analysis report includes the sensitivity curve shown on the graph.

03691215NPV (Millions of dollars)COST OF CAPITAL (Percent)Base Case NPVBase Case Cost of Capital

This curve implies that the project is not very sensitive to changes in cost of capital. The projects NPV is likely to if the cost of capital increases to 15%.

Along with the sensitivity analysis, Zhi is including a scenario analysis for the project in her report, giving the probability of the project generating a negative NPV. Her report includes the following information about the scenario analysis:

Data Collected

Outcome	NPVjj	Probability (Pjj)
Pessimistic	$3.50 million	0.20
Most likely	$5.62 million	0.45
Optimistic	$11.34 million	0.35

Probability Data for z

z	0.03	0.06	0.09
-1.0	0.1515	0.1446	0.1379
-0.8	0.2033	0.1949	0.1867
-0.6	0.2643	0.2546	0.2451
-0.4	0.3336	0.3228	0.3121

Complete the missing information in Zhis report: (Note: Round your answers to two decimal places.)

	The expected net present value of the project is .
	Standard deviation of the net present value (the NPV of the project is likely to vary by) $ million.
	Assuming that probability distribution is normal, the value of z is .
	Thus, the project has a chance to generate an NPV of less than $0.