Explain capital budgeting involves calculation present value

Reference no: EM1312947

Explain Capital budgeting involves calculation of net present value

Klott Company encounters significant uncertainty with its sales volume and price in its primary product. The firm uses scenario analysis in order to determine an expected NPV, which it then uses in its budget. The base case, best case, and worse case scenarios and probabilities are provided in the table below. What is Klott\'s expected NPV, standard deviation of NPV, and coefficient of variation of NPV?

	Probability of Outcome	Unit Sales (Volume)	Sales Price	NPV (In Thousands)
Worst case	0.3	6,000	$3,600	($6,000)
Base case	0.5	10,000	4,200	13,000
Best case	0.2	13,000	4,400	28,000

Reference no: EM1312947

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