The managers of Merton Medical Clinic are analyzing a proposed project. The project’s most likely NPV is $120,000, but as evidenced by the following NPV distribution, there is considerable risk involved: Probability 0.05 0.20 0.50 0.20 0.05 NPV ($700,000) (250,000) 120,000 200,000 300,000 a. What: are the project’s expected NPV and standard deviation of NPV? b. Should the base case analysis use the most likely NPV or the expected NPV? Explain your answer.
How do would you set this up in Excel and what would the formulas be?