The managers of Merton Medical Clinic are analyzing a proposed project. The project's most likely Net Present Value (NPV) is $120,000, but, as evidenced by the following NPV distribution, there is considerable risk involved:
a. What are the project's expected NPV and standard deviation of NPV?
b. Should the base case analysis use the most likely NPV or expected NPV? Explain your answer.
Expected NPV = - 0.05 *$700,000 - 0.2 *$250,000 + 0.5 *$120,000+ 0.2* $200,000+0.05 *$300,000 ...
The solution guides you to calculate the expected NPV and standard deviation of NPV. Then more details on expected NPV are analyzed in details.
Pappy's Potato: Calculating Project Cash Flows and NPV for your portfolio
Calculating Project Cash Flows and NPV - See attached file.
If your portfolio is invested 30 percent each in A and B and 40 percent in C, what is the portfolio's expected return? The variance? The standard deviation?
b. If the expected T-bill rate is 4.25 percent, what is the expected risk premium on the portfolio?
c. If the expected inflation rate is 3 percent, what is the expected real return on the portfolio? What is the expected real risk premium on the portfolio?View Full Posting Details