What are the projects expected npv

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1. The director of capital budgeting for Big Sky Health Systems, Inc.,has estimated the following cash flows in thousands of dollars for a proposed new service:Year Expected Net Cash Flow0 ($100)1 702 503 20The project's cost of capital is 10 percent.a. What is the project's payback period?b. What is the project's NPV?c. What is the project's IRR?

2. The managers of Merton Medical Clinic are analyzing a proposed project. The project's most likely NPV is $120,000, but, as evidenced by the following NPV distribution, there is considerable risk involved:

Probability NPV0.05 ($700,000)0.20 (250,000)0.50 120,0000.20 200,0000.05 300,000

a. What are the project's expected NPV and standard deviation of NPV?b. Should the base case analysis use the most likely NPV or expected NPV? Explain your answer.

Reference no: EM13502287

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