A random variable is defined as the outcome of one or more chance processes. Imagine...
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Finance
A random variable is defined as the outcome of one or more chance processes. Imagine that you're forecasting the cash flows associated with a new business venture. List some of the things that come together to produce cash flows in future periods. Describe how they might be considered to be outcomes of chance processes and therefore random variables. Cash flow forecasts for a project are put together by using Equations (10-1) and (10-2) to calculate the project's NPV and IRR. That makes NPV and IRR random variables as well. Is their variability likely to be greater or less than the variability of the individual cash flows making them up?
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