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    Coefficeint of variation of NPV

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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 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.

    © BrainMass Inc. brainmass.com December 24, 2021, 7:50 pm ad1c9bdddf
    https://brainmass.com/business/net-present-value/coefficeint-variation-npv-223278

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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 company's expected NPV, standard deviation of NPV, and coefficeint 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

    Project A
    Possible Events NPV Probability Cash inflow x Probability Difference from mean, i.e.10300 Difference 2 Prob x Difference 2
    worst case -$6,000 0.30 -1,800 -16,300 265,690,000 79,707,000
    =-6000x0.3 =-6000-10300 =-16300^2 =0.3x265690000
    base case $13,000 0.50 6,500 2,700 7,290,000 3,645,000
    best case $28,000 0.20 5,600 17,700 313,290,000 62,658,000
    1.00 10,300 146,010,000

    Expected NPV= $10,300
    Variance= 146,010,000
    Standard deviation=square root of Variance= $12,083 =square root of 146010000
    Coefficient of variation = SD/Mean= 1.1731 =12083./10300.

    (Expected NPV and standard deviation of NPV in thousands).

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 7:50 pm ad1c9bdddf>
    https://brainmass.com/business/net-present-value/coefficeint-variation-npv-223278

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