Question

SCENARIO ANALYSIS Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be “average.” However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results:

Economic Scenario	Probability of Outcome	NPV
Recession	0.05	($70 million)
Below average	0.20	(25 million)
Average	0.50	12 million
Above average	0.20	20 million
Boom	0.05	30 million

Calculate the project’s expected NPV, standard deviation, and coefficient of variation.

Answer 1