Coefficeint of variation of NPV
My company encounters significant uncertainty with its sales volume and price in its primary product. The firm uses scenario analysis in order to determine an expected NPV, which it then used in its budget. The base case, best case, and worse case scenarios and probabilities are provided in the table below. What is my company's expected NPV, standard deviation of NPV, and coefficient of variation of NPV?
Probability of outcome Unit Sales Volume Sales Price NPV (IN thousands)
worst case .30 6,000 $3,600 -$6,000
base case .50 10,000 $4,200 $13,000
BEST case .20 13,000 $4,400 $28,000.
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My company encounters significant uncertainty with its sales volume and price in its primary product. The firm uses scenario analysis in order to determine an expected NPV, which it then used in its budget. The base case, best case, and worse case scenarios and probabilities are provided in the table below. What is my ...
Solution Summary
The expected NPV, standard deviation of NPV, and coefficeint of variation of NPV is calculated when a probability distribution of NPV is given.