The managers of Tetron Medical Clinic are analyzing a proposed project. The following NPV distribution is...

The managers of Tetron Medical Clinic are analyzing a proposed project. The following NPV distribution is given.

Probability	NPV
0.05	-$700,000
0.2	-$250,000
0.5	$120,000
0.2	$200,000
0.05	$300,000

a. What is the project's expected NPV and standard deviation of NPV?

b. Compute CV?

c. What decision is appropriate for this project using NPV, standard deviation and CV?

Please show your work.

Solutions

Expert Solution

Calculate the expected NPV and standard deviation and CV as follows:

Formulas:

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NPV method is used for accepting or rejecting the project. As, the Expected NPV is positive accept the project.

Ignore standard deviation and CV. Standard deviation and CV are used to compare between two projects. When using this two, project conflicts, NPV will prevail over both.

jeff jeffy answered 1 year ago

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