The worst case and best case npv?

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The Staff of Jefferson Medical Services has estimated the following net cash flows for a food services operation that it may open in its outpatient clinic:

Year Expected net cash flow

0 ($100,000)

1 30,000

2 30,000

3 30,000

4 30,000

5 30,000

5(salvage value) 20,000

The Year o cash flow is the net investment outlay, while the final amount is the terminal cash flow. (The clinic is expected to move to a new building in five years.) All other flows represent net operating cash flows. Jefferson's corporate cost of capital is 10%.

a. What is the project's IRR??

b. Assuming the project has average risk, what us its NPV??

c. Now assuming that operating cash flows in Year 1 through 5 could be as low as $20,000 or as high as $40,000. Furthermore, the salvage value cash flow at the end of Year 5 could be as low as $0 or as high as $30,000. What is the worst case and best case IRR??

The worst case and best case NPV?

Reference no: EM13901444

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