Question

"A company's marketing strategy will last two years and produce revenue in years 1 and 2 only. The strategy can result in a success, a moderate success, or a failure. The marketing strategy will cost $71,000 immediately (year 0), $42,000 in year 1, and $13,000 in year 2. There is uncertainty with projected revenues, but the forecasted revenues and probabilities for the marketing strategy are as follows: - Success: Year 1: $107,000; Year 2: $114,000; Probability: 0.21 - Moderate success: Year 1: $94,000; Year 2: $76,000; Probability: 0.43 - Failure: Year 1: $38,000; Year 2: $48,000; Probability: 0.36 The company's MARR is 25%. You can ignore any other costs except for the marketing costs. Calculate the standard deviation of the net present worth for the strategy. HINT: it is easier to calculate the net present worth of each separate result first (success, moderate success, failure) before dealing with the probabilities."

Answer 1