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Merton Clinic managers are analyzing a new project. The project’s most likely NPV is $120,000. The...

Merton Clinic managers are analyzing a new project. The project’s most likely NPV is $120,000. The project cost of capital (discount rate) is 10 percent.

Probability   NPV

0.05   ($800,000)

0.25   200,000

0.50   400,000

0.20   600,000

What is the project’s standard deviation?

a. -$300,000

b. $300,485

c. *$291,719

d. $281,593

e. $300,000

Solutions

Expert Solution

Solution :

The project's Standard Deviation is = $ 291,719.0429

= $ 291,719 ( when rounded off to the nearest whole number )

The solution is Option c. $ 291,719

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

jeff jeffy answered 2 years ago
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