Toughnut plc is considering a two-year project that has the following probability distribution of returns: The events

Question:

Toughnut plc is considering a two-year project that has the following probability of returns:

The events in each year are independent of other years (that is, there are no conditional probabilities). An outlay of £15,000 is payable at Time 0 and the other cash flows are receivable at the year ends. The risk-adjusted discount rate is 11 per cent.
Calculate
a. The expected NPV.
b. The standard deviation of NPV.
c. The probability of the NPV being less than zero assuming a normal distribution of return - (bell shaped and symmetrical about the mean).

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