What is the project expected NPV

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Question - 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.

Required -

a. What is the project's expected (i.e. base case) NPV assuming average risk?

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

Reference no: EM132807056

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