Purchase Solution

NPV for a project; worst possible outcome and the probability of its occurrence

Not what you're looking for?

Ask Custom Question

Please see attachment

I only need assistance with Part 4b.

I don't know how to calculate the NPV in this circumstance.

Attachments
Purchase this Solution
Solution Summary

As requested, the solution presents a fully detailed explanation of the problem complete with the calculation of the answer.

Solution Preview

b) The company you have selected is considering investing money in a new specialised financial information system. The purchase price of the system would be £540,000 and would result in administrative cost savings over a four year period. The purchase price would be funded entirely by a new bank loan with an associated cost of capital of 10%. ...

Purchase this Solution
Free BrainMass Quizzes
Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

View More Free Quizzes
Related BrainMass Solutions

  • Accounting: Capital budgeting and Decision Making

    and the eventual expected outcome value of all the scenarios.

  • Coefficeint of variation of NPV

    $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

  • NPV Investment Opportunity

    Expected NPV = Σ (p × Scenario NPV) Scenario NPV is the NPV under a specific scenario while p stands for the probability of occurrence of each scenario.

  • Cash Flow Calculations

    Assign probability values to outcomes. 6. A. May raise the NPV of a capital project. The solution answers the question below in great detail.

  • Expected NPV Value and Risk (standard deviation and coefficient of variation) Analysis

    Step 2: Enter information about probability of each possible outcome and the expected annual rate of increase in revenues. Take these values from the given data.

  • NPV, standard deviation, and coefficient of variation

    117188 What is the project's expected NPV, its standard deviation, and its coefficient of variation? Shao Industries is considering a proposed project for its capital budget. The company estimates that the project's NPV is $12 million.

  • Coefficient of variation, NPV, Normal Distribution

    Similarly 95.44 (Please see attached file for complete description) a) What is the probability that the outcome would be between $32,000 and $48,000? b) What is the probability that the outcome would be between $28,000 and $52,000?

  • Decision Making for Risk

    We identify the outcome or payoff for each possible future or alternative, and the probability of its occurrence. We will use the expected value model to make decisions. A good decision is not necessarily one where we achieve a good outcome.

  • Risk Analysis: Qualitative Vs. Quantitative

    The possible outcome of the project is quantified and the probability of achieving certain project activities is assessed. The prioritized list of risks identified by the qualitative risk analysis is used for quantitative risk analysis.

View More Related Solutions