The managers of the Merton Medical Clinic are analyzing a proposed project. The project most likely nap is $120,000, but as evidenced by the following NPV distribution there is considerable risk involved:
Probability NPV
0.05 (700,000)
0.20 (250,000)
0.50 120,000
0.20 200,000
0.05 300,000
A). What are the project's expected NPV and the standard deviation of NPV?
B). Should the base case analysis use the most likely NPV or the excepted NPV? Explain your answer?