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Do you agree with managers interpretation of the analysis

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Decisions based on capital budgeting. Marathon plc considers a one-year project with the Belgian government. Its euro revenue would be guaranteed. Its consultant states that the percentage change in the euro is represented by a normal distribution based on a 95% confidence interval, the percentage change in the euro is expected to be between 0% and 6%. Marathon uses this information to create three scenarios: 0%, 3% and 6% for the euro. It derives an estimated NPV based on each scenario and then determines the mean NPV. The NPV was positive for the 3% and 6% scenarios, but was slightly negative for the 0% scenario. This led Marathon to reject the project. Its manager stated that it did not want to pursue a project that had a one-in- three chance of having a negative NPV. Do you agree with the manager's interpretation of the analysis? Explain.

Reference no: EM13935610

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