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    Calculating Expected NPV, variance and variation coefficient

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    Company A is considering a proposed project whose estimated NPV is 12 million. The estimate assumes that economic conditions will be "average". However the CFO realizes that conditions could be better or worse, so a scenario analysis was performed and the following results were obtained;

    Economic Scenario Prob. of Outcome NPV

    Recession .05 (70 million)

    Below Average .20 (25 million)

    Average .50 12 million

    Above average .20 20 million

    Boom .05 30 million

    Calculate the projects expected NPV, standard deviation, and coefficient of variation. Please show calculations.

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    Economic Probability of NPV Mean
    Scenario outcome P X P*X X-Mean ...

    Solution Summary

    Solution describes the steps in calculating expected NPV, variation, standard deviation and coefficient of variation.