What is the projected expected npv


Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities 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           30,000

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%.

a). What is the projected expected NPV assuming average risk?

b).What are the projects most likely, worst, and the best base case NPV

c). What is the project's expected NPV on the basis of the scenario analysis?

d). What is the projected standard deviation of NPV?

e). Assume that Heywood's managers judge the project to have lower than average risk. the policy is to adjust the corporate cost of capital up or down by 3% points to account for differential risk. Is the project financially attractive?

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Financial Accounting: What is the projected expected npv
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