51、An analyst estimates that an initial investment of £500,000 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. £4,000.

B. £128,000.

C. £1,125,000.

D. £2,014,000.

[此贴子已经被作者于2008-11-7 13:07:25编辑过]

51、An analyst estimates that an initial investment of £500,000 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. £4,000.

B. £128,000.

C. £1,125,000.

D. £2,014,000.

  
Correct answer = B

"Alternative Investments," Bruno Solnik and Dennis McLeavey
2008 Modular Level I, Vol. 6, pp. 205-206
Study Session 18-76-h
calculate the net present value (NPV) of a venture capital project, given the project's possible payoff and conditional failure probabilities
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 ₤2,014,296 using FV = ₤6,000,000, I = 19%, and n = 5, for a present value of ₤2,514,296 - ₤500,000 = ₤2,014,296. The NPV of the project is 0.25(2,014,296) + 0.75(-500,000) = ₤128,574. The investment has a positive NPV and should be accepted. 

thx

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