Would this project be classified as a high-risk

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1. Use your decision tree data to find the project's standard deviation and coefficient of variation of NPV. Suppose that Kereru Fisheries Ltd's average projects have coefficients of variation of NPV in the range of 0.5 to 1.0. Would this project be classified as a high-risk, average-risk, or low-risk project?

2. What is the overall project's risk-adjusted NPV? (Hint: Use the percentage given in the question to adjust up or down to obtain the risk-adjusted discount rate. Use this to re-calculate the NPV, IRR, MIRR, payback period, and expected NPV as for Question 4 and 5.)

3. Consider all of the information obtained so far. What do you think Kereru Fisheries Ltd should do? Carefully justify your final conclusions. (Hint: Discuss the viability of the two stage process in this project, the suitability of the risk-adjusted discount rate and the possibility of using real options, such as abandonment or a timing option.)

 

Reference no: EM13501449

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