Heywood diagnostic enterprises is evaluating a project with

Question

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

4          20,000                        30,000                        40,000

5          30,000                        40,000                        50,000

a. What is the project’s expected NPV on the basis of the scenario analysis?

b. What is the projects standard deviation of NPV?