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Hello 🙂
Q;Which of the following statement is correct??
1)Its about Sensitivity and its correct
2)The expected NPV is the value expected to occur If an investment project with several possible outcomes is undertaken once…Well statement2 is wrong by giving reason Expected NPV would only be achieved if a project is repeateed many times into the future..
But sir point is…We calculta NPV by considering cashflows of 4-5 years then we add back all of them to get P.V(Undertake once)..then why statement 2 is wrong..
The expected NPV is the average of all the possible NPV’s.
If a project was undertaken many times, then the various NPV’s would all occur and the average would be relevant.
If it is only undertaken once the just one NPV will occur, and this will not be equal to the average of all possible NPV’s.
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