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3. You have been presented with the estimated after-tax cash flows on a five-year project: CF1 = $10, CF2 = $20, CF3 = $30, CF4

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3. You have been presented with the estimated after-tax cash flows on a five-year project: CF1 = $10, CF2 = $20, CF3 = $30, CF4 = $40, CF5 = $50. The initial investment is Io = -$100. (a) Assume the project's cost of capital is r = 10%. Compute the project's NPV. (b) You are concerned about the validity of r and want to perform a sensitivity analysis. You believe that r is drawn from the following probability distribution: 1% 5% 10% 15% with probability 10% with probability 15% with probability 50% with probability 15% r = 20% with probability 10% Based on this distribution, what is the expected NPV for the project? What is the probability that the NPV is negative

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