Probability that the project will have a net present value

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A simulation model similar to the one described in this chapter has been constructed by the Great Basin Corporation to evaluate the largest of its new investment proposals.

After many iterations of the model, Great Basin's management has arrived at an expected net present value for Project A of $1.0 million. The standard deviation of the net present value has been estimated from the simulation model results to be $0.8 million.

a. What is the probability that the project will have a negative net present value?

b. What is the probability that the project will have a net present value greater than $2.2 million?

Reference no: EM131337328

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