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A project's base case or most likely NPV is $50,000, and assume its probability of occurrence...

A project's base case or most likely NPV is $50,000, and assume its probability of occurrence is 60%. Assume the best case scenario NPV is 70% higher than the base case and assume the worst scenario NPV is 30% lower than the base case. Both the best case scenario and the worst case scenario have a 20% probability of occurrence. Find the project's coefficient of variation. Enter your answer rounded to two decimal places. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

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Answer #1

Best Case NPV = 50000*(1+70%) =85000
Worst Case NPV =50000*(1-30%) =35000
Expected NPV = Probability of base Case* NPV of base case + Probability of best Case scenario *NPV of best case scenario + Probability of Worst Case scenario *NPV of worst case scenario =60%*50000+20%*50000*(1+70%)+20%*50000(1-30%)
=54000

Standard Deviation =(60%*(50000-54000)^2+20%*(85000-54000)^2+20%*(35000-54000)^2)^0.5 =16552.95

Coefficient of Variation =Standard Deviation/Expected Return =16552.95/54000 =0.31

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