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July 28, 2014

Homework Help: Finance

Posted by Jenny on Thursday, November 2, 2006 at 12:22am.

I need help on this study problem.-----
A firm computes the probability distribution of possible net present values for a project and finds that it has an expected value of $125,000 and a standard deviation of $75,000. Assuming that the distribution of net present value is normal, compute the probability that the net present will be less than zero.--------------------



You will need cumlative normal distribution table. First calculate how many standard deviations away from the mean is zero. (125/75)=1.67
Look up this in the table. In my stats book, the value is .9525. Ergo, in 95.25% of the time, the value will be zero or more.

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