Shao industries is considering a proposed project for its

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Shao Industries is considering a proposed project for its capital budget. The company estimates that the project"s NPV is $12 million. This estimate assumes that the economy and market conditions will be average over the next few years. The company"s CFO, however, forecasts that there is only a 50 percent chance that the economy will be average. Recognizing this uncertainty, she has also performed the following scenario analysis:

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

What is the project"s expected NPV, its standard deviation, and its coefficient of variation?

Reference no: EM13483195

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