Increase the sophistication of its exercise equipment

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Reference no: EM132007802

Larry’s Athletic Lounge is planning an expansion program to increase the sophistication of its exercise equipment. Larry is considering some new equipment priced at $20,000 with an estimated life of five years. Larry is not sure how many members the new equipment will attract, but he estimates his increased yearly cash flows for each of the next five years will have the probability distribution given below. Larry’s cost of capital is 14 percent.

P (probability) Cash Flow

2..................... $2,400

4..................... 4,800

3..................... 6,000

1..................... 7,200

What is the expected net present value and IRR?

Reference no: EM132007802

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