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 ($100,000) ($100,000) ($100,000) $40,000 $40,000 $40,000 $40,000 $50,000 $30,000 $20,000 $20,000 $20,000 1 $30,000 $30,000 $30,000 $40,000 2 3 $20,000 $30,000 4 The year 5 values include salvage value. Heywood's corporate cost of capital is 10%. (a) What are the project's most likely, worst-case, and best-case NPVS? (b) What is the project's expected NPV on the basis of scenario analysis?

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 ($100,000) ($100,000) ($100,000) $40,000 $40,000 $40,000 $40,000 $50,000 $30,000 $20,000 $20,000 $20,000 1 $30,000 $30,000 $30,000 $40,000 2 3 $20,000 $30,000 4 The year 5 values include salvage value. Heywood's corporate cost of capital is 10%. (a) What are the project's most likely, worst-case, and best-case NPVS? (b) What is the project's expected NPV on the basis of scenario analysis?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 2STP

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