A project requires an immediate cash outflow of £300 million in return for the following probable cash flows: State of Economy Probability of State of Economy Year 1 £ in million Year 2 £ in million Recession 0.2 800 130 Growth 0.5 300 350 Boom 0.3 900 440 Assume that the state of economy will be the same in the second year as in the first. The required rate of return is 7%. There is no tax or inflation.Required:a- Calculate the expected NPVb- Calculate the standard deviation of NPV

A project requires an immediate cash outflow of £300 million in return for the following probable cash flows: State of Economy Probability of State of Economy Year 1 £ in million Year 2 £ in million...

A project requires an immediate cash outflow of £300 million in return for the following probable cash flows:

State of Economy	Probability of State of Economy	Year 1 £ in million	Year 2 £ in million
Recession	0.2	800	130
Growth	0.5	300	350
Boom	0.3	900	440

Assume that the state of economy will be the same in the second year as in the first. The required rate of return is 7%. There is no tax or inflation.

Required:

a- Calculate the expected NPV

b- Calculate the standard deviation of NPV

Jun 10, 2022

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A project requires an immediate cash outflow of £300 million in return for the following probable cash flows: State of Economy Probability of State of Economy Year 1 £ in million Year 2 £ in million...

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