An analyst estimates that an initial investment of ￡ 500000 in a venture capital project will pay ￡ 6 million at the end of five years if the project succeeds and that the probability the project survives to the end of the fifth year is 25 percent. The required rate of return for the project is 19 percent. The expected net present value of the venture capital investment is closest to:
A．
| A. ￡ 4000. |
B．
| B. ￡ 128000. |
C．
| C. ￡ 1125000. |
参考答案：B
解析：The probability that the venture will pay ￡ 6 million at the end of five years is 25%. The probability of failure is 75%. The expected NPV if the project succeeds is ￡ 2014296 using FV= ￡ 6000000, I=19% , and n=5, for a present value of ￡ 2514296 - ￡ 500000= ￡ 2014296. The NPV of the project is 0.25×2014296+0.75×(-500000)=￡ 128574. The investment has a positive NPV and should be accepted.