c. Suppose the CFO wants you to do a scenario analysis with different values for the cost savings, the machine’s salvage value, and the working capital (WC) requirement.

She asks you to use the following probabilities and values in the scenario analysis:

Scenario Probability Cost Savings Salvage Value WC Worst case 0.35 $ 72,000 $18,000 $30,000 Base case 0.35 90,000 23,000 25,000 Best case 0.30 108,000 28,000 20,000 Calculate the project’s expected NPV, its standard deviation, and its coefficient of variation. Would you recommend that the project be accepted?

Chapter 11: Cash Flow Estimation and Risk Analysis 461