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Investment decisions
Financial Management
In the problem, for calculating 1st part , sir has considered 3 scenarios and calculated NPV for each scenario. However, while calculating 2nd part[expected NPV] , Sir has combined all the expected annual cash inflow and calculated NPV for the total. Why sir has not calculated expected NPV for each scenario?
Answers (2)
In 1st question, it is clearly asked that calculate NPV under 3 scenarios. However in 2nd question, they just asked for Expected NPV which we can solve by taking cash flows together (like how sir did) OR Calculate NPV separately which gives the answer of 1st question and then multiply the NPV with the respective probabilities. Add them you will get the same answer. [So if you do it separately or together you will get same answer]
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