Projects expected NPV on basis of the scenario analysis

Assignment Help Financial Management
Reference no: EM13911538

Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities:

Year    Prob = 0.2      Prob = 0.6      Prob = 0.2

0          (100,000)      (100,000)      (100,000)

1          20,000                        30,000                        40,000

2          20,000                        30,000                        40,000

4          20,000                        30,000                        40,000

5          30,000                        40,000                        50,000

a. What is the project’s expected NPV on the basis of the scenario analysis?

b. What is the projects standard deviation of NPV?

Reference no: EM13911538

Questions Cloud

Investors expect the dividend to grow : Zeniba Inc.’s stock is currently selling for $23.56 per share. The company just paid a dividend = $2.00 per share (i.e., D0 = $2.00), and investors expect the dividend to grow at a constant rate out into the future. Investors require a minimum annual..
What is your incremental cash flow from selling the machine : You purchased a machine for $1.06 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 35%. If you sell the machine today (after three years of depreciation) for $779,000, what is y..
What is cost of equity if you ignore taxes : Alpha company has a debt-equity ratio of .6, a pretax cost of debt of 7.5%, and an unlevered cost of equity of 12%. What is Alpha's cost of equity if you ignore taxes?
What is the growth rate of dividends per share : Zeniba Inc.’s stock is currently selling for $23.56 per share. The company just paid a dividend = $2.00 per share (i.e., D0 = $2.00), and investors expect the dividend to grow at a constant rate out into the future. Investors require a minimum annual..
Projects expected NPV on basis of the scenario analysis : Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities: What is the project’s expected NPV on the basis of the scenario analysis? What is the projects standard deviation of NPV?
Cash flow for project with the data : As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow? Sales revenues $13,600 Depreciation $4,000 Other operating costs $6,000 Tax rate 35.0%
Valuation-options-what is the intrinsic value of the option : Valuation – options. The following information refers to a six-month call option on the stock of XYZ, Inc. What is the intrinsic value of the option? What is the option’s time premium at this price?
What is the projects expected NPV assuming average risk : Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities: What is the project’s expected NPV assuming average risk?
Sale of a new sound board used in recording studios : Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $25,600, and the company expects to sell 1,410 per year. The company currently sells 1,910 units of its existing model per year..

Reviews

Write a Review

Financial Management Questions & Answers

  Consider buying a share of stock at price

Suppose you consider buying a share of stock at a price of $55. The stock is expected to pay a dividend of $6 next year and to sell then for $57. The stock risk has been evaluated at β = 0.5. Using the SML, calculate the fair rate of return for a sto..

  Total cost is used to determine the price

A company has $45 per unit in variable costs and $1,200,000 per year in fixed costs. Demand is estimated to be 108,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price?

  Always lower than bond equivalent yield on same security

Discount yield is always lower than bond equivalent yield on the same security. Discount yield is always higher than bond equivalent yield on the same security. Discount yield is always equal to bond equivalent yield on the same security. Discount yi..

  Net investment-single net cash flow

Would you recommend a project that has a net investment at time 0 of $15,500 and a single net cash flow of $28,600 at the end of the fifth year if the required rate of return is 12.5%?

  Calculate the first four dividends

Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 29 percent for the next three years, with the growth rate falling off to a constant 7.8 percent thereafter. Required: If the required return is 15 percent and the company just..

  What was the operating cash flow per share

Weston Corporation had earnings per share of $1.41, depreciation expense of $592,800, and 240,000 shares outstanding. What was the operating cash flow per share? If the share price was $51, what was the price-cash flow ratio?

  What is the projects discounted payback period

A project has an initial cost of $925, expected net cash inflows of $690.30 per year for 4 years, and a cost of capital of 11.10%. What is the project's discounted payback period?

  What should the companys bonds be priced at today

Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company's bonds be priced at today? Assume annual ..

  Annual sales of an energy saving device

It is estimated that the annual sales of an energy saving device will be 25,000 the first year and increase by 10,000 per year until 55,000 units are sold during the fourth year. In the fifth year and each year thereafter the sales will decrease by 5..

  What is current share price-the growth rate falling off

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next three years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 14 percent, and the company just paid a di..

  What is the strips price

A STRIPS traded on April 1 2011, matures in 10 years on April 1 2021. Assuming a 5 percent yield to maturity, assume a face value of $100. What is the STRIPS price?

  What will be the future value of johns bank account

John has some extra cash today in the amount of $240 and places the money in the bank for 9 years. John expects to have extra cash one-year from today in the amount of $590, and will leave this second amount in the bank for 8 years. All savings earn ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd