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 worst 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?

\begin{array}{ccccc}&\text { Probability of } & \text { Unit Sales } &\text { Sales} &\text {NPV}\\&\underline{\text { Outcome }} &\underline{ \text { Volume } }&\underline{\text { Price } }& \underline{\text { (In Thousands) }}\\\text { Worst case } & 0.30 & 6,000 & \$ 3,600 & -\$ 6,000 \\\text { Base case } & 0.50 & 10,000 & 4,200 & +13,000 \\\text { Best case } & 0.20 & 13,000 & 4.400 & +28,000\end{array}

\text { Expected NPV }=\$ 35,000 ; \sigma_{\mathrm{NPV}}=17,500 ; \quad \mathrm{CV}_{\mathrm{NPV}}=2.0 \text {. }

b. Expected NPV

=\$ 35,000 ; \quad \sigma_{\mathrm{NPV}}=11,667 ; \quad \mathrm{CV}_{\mathrm{NPV}}=0.33

c. Expected NPV

=\$ 10,300 ; \sigma_{\mathrm{KPV}}=12,083 ; \quad \mathrm{CV}_{\mathrm{KPV}}=1.17

d. Expected NPV

=\$ 13,900 ; \sigma_{\mathrm{NPV}}=8,476 ; \mathrm{CV}_{\mathrm{NPV}}=0.61

.
e. Expected NPV

=\$ 10,300 ; \sigma_{\text {NPV }}=13,900 ; \mathrm{CV}_{\mathrm{NPV}}=1.35

Which of the Following Items Should Not Be Considered When

Multiple Choice

Correct Answer:VerifiedUnlock this answer nowGet Access to more Verified Answers free of chargeAccess For Free

Correct Answer:
Verified
Unlock this answer now
Get Access to more Verified Answers free of charge