Pediatric Partners is evaluating a project with the following net cash flows and probabilities: Year Prob.=0.25 Prob.=0.50 Prob.=0.25 ($75,000) 1 $ 2 $ 3 $ 4 $ 5 $ ($75,000) ($75,000) 15,000 $ 20,000 $ 30,000 20,000 $ 30,000 20,000 $ 30,000 20,000 $ 30,000 30,000 $ 40,000 15,000 $ 15,000 $ 15,000 $ 20,000 $ The year 5 values include salvage values. Pediatric Partners' corporate cost of capital is 12% (a) What is the project's expected NPV assuming average risk? (b) What are the project's most likely, worst-case, and best case NPVS? (c) What is the project's expected NPV on the basis of the scenario analysis? (d) What is the project's standard deviation of NPV?

Pediatric Partners is evaluating a project with the following net cash flows and probabilities: Year Prob.=0.25 Prob.=0.50 Prob.=0.25 ($75,000) 1 $ 2 $ 3 $ 4 $ 5 $ ($75,000) ($75,000) 15,000 $ 20,000 $ 30,000 20,000 $ 30,000 20,000 $ 30,000 20,000 $ 30,000 30,000 $ 40,000 15,000 $ 15,000 $ 15,000 $ 20,000 $ The year 5 values include salvage values. Pediatric Partners' corporate cost of capital is 12% (a) What is the project's expected NPV assuming average risk? (b) What are the project's most likely, worst-case, and best case NPVS? (c) What is the project's expected NPV on the basis of the scenario analysis? (d) What is the project's standard deviation of NPV?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 22E

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