A company is evaluating three proposed projects.

You are required to rank the project wi

A
B
NPV
PROBABILITY(Pi)NPV
PROBABILITY(Pi)
-3500
0.05
-2000
0.01
-1000
0.1
0
0.04
0
0.15
500
0.15
2000
0.2
1500
0.2
4000
0.25
2000
0.3
6000
0.15
2500
0.2
11000
0.08
3000
0.06
17500
0.02
3750
0.04

equired to rank the project with respect to both risk & return

C
NPV
PROBABILITY(Pi)
-4500
0.03
-1500
0.07
0
0.1
3000
0.5
4000
0.25
5000
0.05

PROJECT A
NPV
-3500
-1000
0
2000
4000
6000
11000
17500

Pi NPV*Pi
0.05 -175
0.1
-100
0.15
0
0.2
400
0.25 1000
0.15 900
0.08 880
0.02 350

EXPECTED NPV OF A= 3255

EXPECTED NPV (NPV=NPV*Pi)

PROJECT B
NPV
-2000
0
500
1500
2000
2500
3000
3750

Pi
0.01
0.04
0.15
0.2
0.3
0.2
0.06
0.04

NPV*Pi
-20
0
75
300
600
500
180
150
0
EXPECTED NPV OF B= 1785

PV=NPV*Pi)
PROJECT C
NPV
-4500
-1500
0
3000
4000
5000

Pi
0.03
0.07
0.1
0.5
0.25
0.05

NPV*Pi
-135
-105
0
1500
1000
250

EXPECTED NPV OF C= 2510

DETERMINATION OF STANDARD DEVIATION & COEFFICIENT OF VARIANCE

PROJECT A
NPV NPV NPV-NPV SQUARE(NPV-NPV)
-3500 3255 -6755
45630025
-1000 3255 -4255
18105025
0
3255 -3255
10595025
2000 3255 -1255
1575025
4000 3255
745
555025
6000 3255
2745
7535025
11000 3255
7745
59985025
17500 3255 14245
202920025

Pi
0.05
0.1
0.15
0.2
0.25
0.15
0.08
0.02
TOTAL
SD
CV

VIATION & COEFFICIENT OF VARIANCE

SQUARE(NPV-NPV)*Pi
2281501.25
1810502.5
1589253.75
315005
138756.25
1130253.75
4798802
4058400.5
16122475
4015.28
1.23

DETERMINATION OF STANDARD DEVIATION & COEFFICIENT OF VARIANCE

NPV
-2000
0
500
1500
2000
2500
3000
3750

PROJECT B
NPV NPV-NPV
SQUARE(NPV-NPV)
1785 -3785
14326225
1785 -1785
3186225
1785 -1285
1651225
1785 -285
81225
1785 215
46225
1785 715
511225
1785 1215
1476225
1785 1965
3861225

Pi SQUARE(NPV-NPV)*Pi
0.01
143262.25
0.04
127449
0.15
247683.75
0.2
16245
0.3
13867.5
0.2
102245
0.06
88573.5
0.04
154449

TOTAL
SD
CV

893775
945.40
0.53

F VARIANCE

DETERMINATION OF STANDARD DEVIATION & COEFFICIENT OF VARIANCE

NPV
-4500
-1500
0
3000
4000
5000

PROJECT C
NPVNPV-NPV
SQUARE(NPV-NPV) PiSQUARE(NPV-NPV)*Pi
2510 -7010 49140100
0.03
1474203
2510 -4010 16080100
0.07
1125607
2510 -2510
6300100
0.1
630010
2510 490
240100
0.5
120050
2510 1490
2220100
0.25
555025
2510 2490
6200100
0.05
310005

TOTAL
SD
CV

4214900
2053.02
0.82

T OF VARIANCE

PROJECT A
expected NPV
CV

3255
1.23

PROJECT B
expected NPV
CV

1785
0.53

PROJECT C
expected NPV
CV

2510
0.82
PROJECT RETURN
A
1
B
3
C
2

RISK
1
3
2

SEMI VARIANCE---DETERMINATION OF STANDARD DEVIATION & COEFFICIENT OF VARIANC

NPV
-3500
-1000
0
2000

PROJECT A
NPV NPV-NPV
SQUARE(NPV-NPV) Pi SQUARE(NPV-NPV)*Pi
3255 -6755
45630025
0.05
2281501.25
3255 -4255
18105025
0.1
1810502.5
3255 -3255
10595025
0.15
1589253.75
3255 -1255
1575025
0.2
315005

TOTAL
SD
CV

NPV
-2000
0
500
1500

PROJECT B
NPV NPV-NPV
SQUARE(NPV-NPV)
1785 -3785
14326225
1785 -1785
3186225
1785 -1285
1651225
1785 -285
81225

5996262.5
2448.73
0.75

Pi SQUARE(NPV-NPV)*Pi
0.01
143262.25
0.04
127449
0.15
247683.75
0.2
16245

TOTAL
SD
CV

534640
731.19
0.41

PROJECT C
NPV NPV NPV-NPV
SQUARE(NPV-NPV) Pi SQUARE(NPV-NPV)*Pi
-4500 2510 -7010
49140100
0.03
1474203
-1500 2510 -4010
16080100
0.07
1125607
0 2510 -2510
6300100
0.1
630010

TOTAL
SD
CV

3229820
1797.17
0.72

FICIENT OF VARIANCE