What is the projects expected npv assuming average risk

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Reference no: EM13335562

Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities:

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 $40,000
4 $20,000 $30,000 $40,000
5 $30,000 $40,000 $50,000

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

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.) how is the PVIFA calculated?

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

Reference no: EM13335562

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