Save Rs 499. Go Ad-Free with CAclubindia Pro for 2 Full Years. Subscribe Now!

NPV probability distribution

1529 views 1 replies

srinivas

service

71 Points Posted on 02 May 2009

Dear All,

Kindly get the solution and help me.

Question

Yenki Ltd. is considering two mutually exclusive projects A and B. Project A costs Rs.30000.00 and Project B Rs.36000.00. The NPV probability distribution for each project is as given below:

Project A		Project B
NPV Estimate	Probability	NPV Estimate	Probability
Rs.3000	0.1	Rs.3000	0.2
Rs.6000	0.4	Rs.6000	0.3
Rs.12000	0.4	Rs.12000	0.3
Rs.15000	0.1	Rs.15000	0.2

You are required to compute

1) the expected Net Present Value of Projects A & B.

2) the reisk attached to each project i.e.., standard deviation of each probability distribution.

3) The profitability index of each project.

Which project do you consider more risky and why ?

Please send me the answers with working its urgent……latest by today evening.

Regards,

Srinivas

Replies (1)

deepak

CWA STUDENT AND SERVICE

200 Points Posted on 28 May 2009

Originally posted by :srinivas
"	Dear All, Kindly get the solution and help me. Question Yenki Ltd. is considering two mutually exclusive projects A and B. Project A costs Rs.30000.00 and Project B Rs.36000.00. The NPV probability distribution for each project is as given below: Project A Project B NPV Estimate Probability NPV Estimate Probability Rs.3000 0.1 Rs.3000 0.2 Rs.6000 0.4 Rs.6000 0.3 Rs.12000 0.4 Rs.12000 0.3 Rs.15000 0.1 Rs.15000 0.2 You are required to compute 1) the expected Net Present Value of Projects A & B. 2) the reisk attached to each project i.e.., standard deviation of each probability distribution. 3) The profitability index of each project. Which project do you consider more risky and why ? Please send me the answers with working its urgent……latest by today evening. Regards, Srinivas	"