Consider a project to supplyyour churchwith 55,000gallonsofhand sanitizerannually forchurch services. Youestimate that youwill need an initialGh4,200,000 interms of investment to get the project started. The project will last for 5 years.

The project will bring in annual cash flows of Gh1,375,000. It also estimates a salvage value ofGh300,000 after dismantling costs.

Your cost of capital is13 percent. Assume no taxes or depreciation.

Required:

a)What is theNPVof the sanitizer project? Should you pursue this project?(8 Marks)

b)Suppose you believe that there is a best case scenario where initial investment could be 15% lower with salvage value and revenue being 10% higher, what would be the NPV under this scenario?(6 Marks)

c) In the worst case scenario, you expect annual cash inflows to be 10% lower, salvage value to be 12% lower and initial investment to be 10% higher. Calculate the NPV under this worst case scenario. Would you still pursue the project?(6 Marks)

d) You just received additional information that suggests that your base case (answer to a), best case (b) and worst case (c) scenarios have probabilities of 0.35, 0.35 and 0.30 respectively. What will be theexpected NPVof the sanitizer project. What about the standard deviation of the sanitizer project? Do you think the project is still viable?(10 Marks)