MG Cutting Systems is considering an investment project with the following parameters, where all cost and revenue figures are estimated in constant dollars:

• The project requires the purchase of a $23,000 asset, which will be used for only two years (project life). The project also requires an investment of $3,000 in working capital, and this amount will be fully recovered at the end of year 2.
• The salvage value of this asset at the end of two years is expected to be $6,000.
• The annual revenue and the general inflation rate are discrete random variables but can be described by the following probability distributions:
• Both random variables are statistically independent.
• The investment will be classified as a three‐year MACRS property (tax life).
• It is assumed that the revenues, salvage value, and working capital are responsive to the general inflation rate.
• The revenue and inflation rate dictated during the first year will prevail over the remaining project period.
• The marginal income‐tax rate for the firm is 40%. The firm’s inflation‐free interest rate (i') is 10%.

(a) Determine the PW as a function of X.
(b) Compute the expected NPW of this investment.
(c) Compute the variance of the PW of this investment.