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Hi,
Could you advise on the following please?
3 b) Although there are 2 external variables, because the revised risk attitude of the board is risk seeker, I believe the correct selling price is £95 as this provides the maximum pay-off. Am I right? I saw some other students said they had £75 instead.
3 c) I got the same NPV for project A as the one given for project B. Project B is riskier because its outcomes has a higher standard deviation. However, the VC is risk neutral so I believe they will only look at the expected values and ignore standard deviation. If it’s true, what other tool could be used for deciding between the two projects?
Thank you.
ACCA has now published their answer to this question.
#https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/p5/exampapers/SD19_APM_Answers.pdf
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