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10. This optional problem requires knowledge of statistics. Heywood Home Healthcare is evaluating a project with the following net cash flows and probabilities: Time 0

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10. This optional problem requires knowledge of statistics. Heywood Home Healthcare is evaluating a project with the following net cash flows and probabilities: Time 0 Year 1 Year 2 Year 2 Year 3 Year 4 Prob = 0.2 ($100,000) 20,000 20,000 20,000 20,000 30,000 Prob = 0.6 ($100,000) 30,000 30,000 30,000 30,000 40,000 Prob = 0.2 ($100,000) 40,000 40,000 40,000 40,000 50,000 The year 5 values include salvage value. Heywood's corporate cost of capital is 10 percent. 1. What is the project's most likely (base case) NPV, assuming average risk? 2. What are the project's most likely, worst-case, and best-case NPVS? 3. What is the project's expected NPV on the basis of the scenario analysis? 4. What is the project's standard deviation of NPV? 5. Assume that Heywood's managers judge the project to have lower-than-average risk. Furthermore, the company's policy is to adjust the corporate cost of capital up or down by 3 percentage points to account for differential risk. Is the project financially attractive

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