Expected npv and standard deviation of npv, Corporate Finance

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1. The managers of Merton Medical Clinic are analyzing a proposed project. The project's most likely NPV is $120,000, but, as evidenced by the following NPV distribution, there is considerable risk involved:

Probability         NPV
0.05             -$700,000
0.2               -$250,000
0.5                $120,000
0.2                $200,000
0.05              $300,000

a. What are the project's expected NPV and standard deviation of NPV?

b. Compute CV?

b. Should the base case analysis use the most likely NPV or expected NPV? Explain your answer.


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