Normal Distribution and NPV Analysis. The Halo Shipping Company is considering an investment in a project that requires an investment of $6,000, with a projected after-tax cash inflow generated over the next 3 years as follows:
Period 1 Period 2 Period 3
Probability Cash Flow ($) Probability Cash Flow ($) Probability Cash Flow ($)
0.10 1,000 0.2 1,000 0.3 1,000
0.30 2,000 0.4 2,000 0.4 2,000
0.20 3,000 0.3 3,000 0.1 3,000
0.40 4,000 0.1 4,000 0.2 4,000
Assume that probability distributions are independent and the after-tax risk-free rate of return is 6 percent. Calculate: (a) the expected NPV of the project; (b) the standard deviation of the expected NPV; (c) the probability that the NPV will be zero or less (assume that the probability distribution is normal and continuous); (d ) the probability that the NPV will be greater than zero; and (e) the probability that the NPV will be greater than the expected value.