[chamila]

Thanks to OpenTuition I am pass with 53 marks. Thank you so much

[chamila]

Hi John,

Thank you so much for the reply. It is very clear and really helps.

CK

[chamila]

Hi ,

Could you please any one can give me the easy method to calculate EV for following question? if there is a lecture relate to this please give me the link.

A company is considering a project involving the outlay $300,000 which it estimates will generate cash flows over its two year life at the probability shown in the following table

year 1 Cashflow Probability
100,000 0.25
200,000 0.50
300,000 0.25

year 2
if cash flow in year1 is 100,000
– there is probability of 0.25 – that the cash flow in year 2 will be nill
– there is probability of 0.50 – that the cash flow in year 2 will be 100,000
– there is probability of 0.25 – that the cash flow in year 2 will be 200,000

if cash flow in year1 is 200,000
– there is probability of 0.25 – that the cash flow in year 2 will be 100,000
– there is probability of 0.50 – that the cash flow in year 2 will be 200,000
– there is probability of 0.25 – that the cash flow in year 2 will be 300,000

if cash flow in year1 is 300,000
– there is probability of 0.25 – that the cash flow in year 2 will be 200,000
– there is probability of 0.50 – that the cash flow in year 2 will be 300,000
– there is probability of 0.25 – that the cash flow in year 2 will be 350,000

Company cost of capital 10%

you are required to calculate the EV of project’s NPV and the probability that the NPV will be negative

Thank you so much

CK

[chamila]

Hi

I am studying F9 BPP book and I really can not understand how they calculate expected value (under probability analysis) Could please tell me where i can learn the easy method for this?

CK

[Author]

Posts