Jonathan is the owner of a small construction company. He is thinking about purchasing some construction equipment; however, he knows that the economy will have a major impact on his future cash flows. He is not quite sure what to do with the scenario data that his financial officer gave him, and he is looking for your advice.

Scenario Analysis
	Worst Case	Most Likely	Best Case
	30% Probability	50% Probability	20% Probability
Cost of Investment (Year 0)	308,000	308,000	308,000
Year 1 Net Cash Flow	62,500	84,500	92,500
Year 2 Net Cash Flow	70,800	95,020	100,450
Year 3 Net Cash Flow	84,600	102,500	114,800
Year 4 Net Cash Flow	68,000	94,800	102,500
Year 5 Net Cash Flow	54,500	76,000	86,400
Salvage value (end of year 5)	12,000	26,000	38,000

You explain to him that the expected return of the project is the sum of the weighted expected returns from each scenario. Question 3.1 Does the project make sense if the cost of capital is 12%? Explain. Question 3.2 Does the project make sense if Jonathan demands an internal rate of return of 15%? Explain.