Scenario Analysis
Shao Industries is considering a proposed project for its capital budget. The company estimates the project's NPV is $12 million. This estimate assumes that the economy and market conditions will be average over the next few years. The company's CFO, however, forecasts there is only a 50% chance that the economy will be average. Recognizing this uncertainty, she has also performed the following scenario analysis:
Economic
Scenario |
Probability of
Outcome |
NPV |
| Recession |
0.05 |
-$76 million |
| Below average |
0.20 |
-24 million |
| Average |
0.50 |
12 million |
| Above average |
0.20 |
24 million |
| Boom |
0.05 |
26 million |
What is the project's expected NPV, its standard deviation, and its coefficient of variation? Enter your answers for the NPV and standard deviation in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to two decimal places.
| E(NPV) |
$ million |
| sNPV |
$ million |
| CVNPV |
|