Considering a real estate development project

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The Glendale Corp. is considering a real estate development project that will cost $5 million to undertake and is expected to produce annual inflows between $1 million and $4 million for two years. Management feels that if the project turns out really well the inflows will be $3 million in the first year and $4 million in the second. If things go very poorly, on the other hand, inflows of $1 million followed by $2.5 million are more likely. Develop a range of NPVs for the project if Glendale's cost of capital is 8%. Round the answers to the nearest dollar.

NPV for the good scenario. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000, not 1.2.

$   

NPV for the unfavorable scenario. Use a minus sign to indicate a negative NPV. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000, not 1.2.

$

Reference no: EM131348766

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