What is the project expected npv assuming average risk

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Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities(Prob)

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

3             20,000                    30,000            30,000

4             20,000                   30,000             40,000

5             20,000                40,000                50,000

The year 5 values include salvage value. Heywood's corporate cost of capital is 10 percent.

Problem a. What is the project's expected (i.e. base case) NPV assuming average risk? (Hint: The base case net cash flows are the expected cash flows in each year)

Problem b. What are the project's most likely, worst-case, and best-case NPVs?

Reference no: EM132771182

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