1．A portfolio manager is analyzing a $2,000,000 venture capital investment. If the project succeeds until the end of the sixth year, the net present value (NPV) of the project is $6,587,000. The project has a 32.69 percent probability of surviving to the end of the sixth year. The expected NPV of the project is: A) $6,587,000. B) $4,587,000. C) $807,090. D) $2,153,290. The correct answer was C) The project’s expected NPV is a probability-weighted average of the two possible outcomes: $6,587,000 if it is successful or the loss of the initial $2,000,000 investment if it fails. The expected NPV for the project is: (.3269 × 6,587,000) + (.6731 × -$2,000,000) = $807,090 2．Which of the following statements regarding venture capital theory is TRUE? A) The net present value of a venture capital project that fails is zero. B) A venture capital project’s expected NPV is a probability-weighted average of the two possible outcomes: success and failure. C) It is impossible to calculate the expected NPV of a venture capital project because of the uncertainty of future cash flows. D) The probability of failure for a venture capital project will diminish over time. The correct answer was B) The net present value of a venture capital project that fails is almost certainly less than zero. It is difficult to estimate the NPV of a project, but it is not impossible. The probability of failure may or may not diminish over time, depending on the project. The expected NPV is a probability-weighted average of the two possible outcomes: success or failure. 3．An investor is considering investing in a venture capital project that will have a large payoff at exit, which is estimated to occur in four years. The investor realizes that the risk of failure is high, given the following estimated probabilities: Year | 1 | 2 | 3 | 4 | Failure Probability | 0.30 | 0.28 | 0.28 | 0.25 |
The probability that the project will survive to the end of the fourth year is: A) 25.00%. B) 27.75%. C) 72.78%. D) 27.22%. The correct answer was D) The probability is calculated as: (1-0.30) × (1-0.28) × (1-0.28) × (1-0.25) = .2722 or 27.22% | 
发表于 2008-4-4 14:00
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