Toughnut plc is considering a two-year project that has the following probabi

Toughnut plc is
considering a two-year project that has the following probability distribution of returns:
Year 1

Year 2

Return $

Probability

Return $

Probability

8000

.1

4000

.3

10000

.6

8000

.7

12000

.3

The events in each year are independent of other years (that is there are no conditional probabilities). An
outlay of 15000 is payable at Time 0 and other cash flows are receivable at the year ends. The risk-adjusted discount rate is 11 percent.

Calculate

a. The expected NPV

b. The standard deviation of NPV