Calculate the expected npv

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Reference no: EM131958069

Itsoseng NGO is evaluating a two-year project that has the following probability distribution of returns: The events in each year are independent of other years (that is, there are no conditional probabilities).

An outlay of R15 000 is payable at Time 0 and the other cash flows are receivable at the year ends. The risk-adjusted discount rate is 11 per cent.

Year 1		Year 2
Return	Probability	Return	Probability
8 000	0.1	4 000	0.3
10 000	0.6	8 000	0.7
12 000	0.3

Calculate:

1.1. The expected NPV.

1.2. The standard deviation of NPV.

1.3. The probability of the NPV being less than zero assuming a normal distribution of return - (bell shaped and symmetrical about the mean).

1.4. Interpret the figure calculated in (1.3 above).

Reference no: EM131958069

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