Calculate the effect of waiting on the project risk

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The initial investment is $1,500. NPC has the opportunity to invest in a project that has a 75% chance of generating $500 per year for 7-years under good conditions or a 25% chance of generating $25 per year for 7-years. Assuming that all cash flows are discounted at 10%, calculate the effect of waiting on the project's risk, using the same data. By how much will delaying reduce the project's coefficient of variation? (Hint: Use the expected NPV.)

  • 2.23
  • 2.46
  • 2.70
  • 2.97
  • 3.27

Reference no: EM131318136

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