Your company is evaluating to invest in a project that requires RM100,000 investment. The required rate of
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Question:
Your company is evaluating to invest in a project that requires RM100,000 investment. The required rate of return is 10 percent per annum. You have estimated three different scenarios and have tabled the cash flow projection for each of the scenarios.
Scenario | 0 (RM) | Year 1 (RM) | Year 2 (RM) | Pi |
Good | -100,000 | 60,000 | 80,000 | 0.4 |
Fair | 50,000 | 70,000 | 0.4 | |
Bad | 30,000 | 40,000 | 0.2 |
(a) Calculate the Net Present Value (NPV) for each of the scenarios. (9 marks)
(b) By using the above probability (Pi), calculated the expected Net Present Value, E(NPV). (4 marks)
(c) Calculate the standard deviation of NPV. (7 marks)
Related Book For
Financial reporting, financial statement analysis and valuation a strategic perspective
ISBN: 978-0324789416
7th Edition
Authors: James M Wahlen, Stephen P Baginskl, Mark T Bradshaw
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