A project\'s NPV under uncertainty that has an expected return of 15% and a satu

Question

A project's NPV under uncertainty that has an expected return of 15% and a saturated deviation of 10%. What is the NPV's coefficient of variation? The company accepts risky projects with a maximum CV of 0.8. Would you recommend that the project from part(a) is accepted? Why or why not? The option to abandon a project is a real option, but an investment timing option is a financial option. True False In the good states of the economy high leverage increases the firm's Return on Equity (Net Income/Equity). How is this situation different in the bad states of the market? Explain using the numbers below

Explanation / Answer

b) The coefficient of variation (COV) can determine the volatility of an investment. since the COV is below the maximum accetable risk limit of .8 , the project can be accepted.

a) Coefficient of Variation = Standard Deviation / Average Return =10%/15%             0.67

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