Taliba is a risk analyst. She is conducting a sensitivity analysis to evaluate the riskiness of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Taliba 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. NPV (Millions of dollars) Base Case NPV Base Case Price -30 -24 -18 -12 -6 0 6 12 18 24 30 CHANGES IN SELLING PRICE (Percent) This curve implies that the project is very sensitive to changes in the price of the product. The project's NPV is likely to become negative if the price for which the product can be sold decreases by Along with the sensitivity analysis, Taliba 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 Probability Data for z Probability 0.03 0.06 0.09 Outcome NPV, (P;) 0.4 0.3336 0.3228 0.3121 Pessimistic -$2.31 million 0.50 0.6 0.2643 0.2546 0.2451 Most likely $4.53 million 0.35 0.8 0.2033 0.1949 0.1867 Optimistic $12.11 million 0.15 1.0 0.1515 0.1446 0.1379 Complete the missing information in Taliba's report: 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. Taliba 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. NPV (Millions of dollars) Base Case NPV Base Case Price -30 -24 -18 -12 -6 0 6 12 18 24 30 CHANGES IN SELLING PRICE (Percent) This curve implies that the project is very sensitive to changes in the price of the product. The project's NPV is likely to become negative if the price for which the product can be sold decreases by Along with the sensitivity analysis, Taliba 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 Probability Data for z Probability 0.03 0.06 0.09 Outcome NPV, (P;) 0.4 0.3336 0.3228 0.3121 Pessimistic -$2.31 million 0.50 0.6 0.2643 0.2546 0.2451 Most likely $4.53 million 0.35 0.8 0.2033 0.1949 0.1867 Optimistic $12.11 million 0.15 1.0 0.1515 0.1446 0.1379 Complete the missing information in Taliba's report: 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.
Expert Answer:
Answer rating: 100% (QA)
Net present value can be defined as the net amount remains after de... View the full answer
Posted Date:
Students also viewed these accounting questions
-
A financial company is considering investing in three projects. If it fully invests in a project, the realized cash flows (in millions of dollars) will be as listed in the file S14_97.xlsx. For...
-
A pharmaceutical company is considering investing in a new and improved vitamin D supplement for children. Vitamin D, whether ingested as a dietary supplement or produced naturally when sunlight...
-
The Clearvoice cell phone company is considering investing in additional cell phone towers across the country to improve its coverage and attract more customers. It estimates that if it builds K...
-
What is the common name for the following structure? CH3 CH3 -C-Br 1 CH3 Isobutyl bromide Osec-Butyl bromide O Neobutyl bromide O Isopropyl methyl bromide t-Butyl bromide
-
What kind of survey (mail, telephone, interview, web, direct observation) would you recommend that a small laundry and dry cleaning business use for each of the following purposes, and why? a. To...
-
The Cocoa Factory manufactures and distributes chocolate products. It purchases cocoa beans and processes them into two intermediate products: chocolate-powder liquor base and milk-chocolate liquor...
-
The dataset ToyotaCorolla.jmp contains data on used cars on sale during the late summer of 2004 in the Netherlands. It has 1436 records containing details on 38 attributes, including Price, Age,...
-
A company has the following data: net sales, $202,500; cost of goods sold, $110,000; selling expenses, $45,000; general and administrative expense, $30,000; interest expense, $2,000; and interest...
-
Sekersiz Industries has 60% debt in its capital structure. Its WACC is 8% and its cost of debt is 5%. The corporate tax rate is 20%. What is the company's cost of equity capita
-
James is 45 years old. He is planning on retiring at age 65 and he is expecting that he will die at age 95. He has been saving for retirement and currently has $250,000 in savings that is earning 6%...
-
What are three DoD policies related to Real Property Management (DODI 4165.70)? Explain.
-
Your bookkeeper extracted a trial balance on 31 December 2008 which failed to agree by 400, a shortage on the credit side of the trial balance. A suspense account was opened for the difference. In...
-
Draw up a profit and loss appropriation account for the year ending 31 December 2013 and statement of financial position extract at that date, from the following: (i) Net profits 111,100. (ii)...
-
Can you replace every switch() statement with a complex if() statement?
-
Should we rely on built-in operator precedence? How can we ensure proper order of evaluation?
-
A Rock, Hill and Pine enter into a joint venture for dealing in paintings. The following transactions took place: Required: Show the joint venture accounts in the books of the three parties. Show in...
-
Task 1.5 Explain to Relevant Work Teams Explain the Operational Plan to at least two relevant work teams-with each team composed of at least three members. Your explanation will include the...
-
7. FALSE DILEMMA 8. GANDWAGON Definition: Fallacy example: How to revise argument: Definition: Fallacy example: How to revise argument:
-
Following the example in the book, assume that the company represented that overhead was 100% fixed and zero percent variable. The following data are applicable to these assertions. Techniques 1...
-
Some people argue that the government should not intervene in the case of a market failure because the government itself is inefficient and will simply create new problems to replace the ones it is...
-
Consider each of the following issues and discuss whether you support Theory X, Theory Y, neither theory, or some combination of them. Issue Theory X Theory Y Whether a person is healthy or sick...
Study smarter with the SolutionInn App