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Hello Mr John
Thank you for the great support
The following question from June 2018 Question 32 (a) (ii)(ii) Calculate the probability of the investment having a negative NPV; (1 mark)
(ii) Negative NPV probability 24% Sum of joint probabilities with negative NPVsHow did we reach to 24%?
many thanks
If you look at the various possible combinations that result in a negative NPV, you will find there are three of them.
(1013) which has a probability of 0.03
(216) which has a probability of 0.06
and, (120) which has a probability of 0.15
(all the other combinations end up with a positive NPV).So the probability of ending up with a negative NPV is 0.03 + 0.06 + 0.15 = 0.24 (or 24%)
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