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In BPP workbook, there is a statement that: “Value at risk is based on a normal distribution, which assumes that success and failure are equally likely. Neither is likely to be true for a one-off project”. I donot understand why? Please explain this to me. Thanks
If the results of everything in the population (i.e. here, all possible projects) then an equal number would give an NPV higher than the mean as give an NPV lower than the mean (because the curve is symmetrical). However just one specific project might be higher or lower.
That is what the statement means, although it is not actually a very well worded statement 🙂
Have you watched my free lectures on VaR?
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