PLEASE SHOW ALL WORK & CALCULATIONS.

Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities (Prob): Year 0 1 2 3 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 4 5 The year 5 values include salvage value. Heywood's corporate cost of capital is 10%. a. What is the project's expected (is, base case) NPV assuming average risk? (Hint: The base case net cash flows are the expected cash flows in each year.) Year E(Value) 0 1 2 3 4 5 Cost of Capital = 10% NPV: b. What are the project's most likely, worst-case, and best-case NPVs? Prob = .20 Prob. = .60 B Prob. = 20 NPV: A Worst-Case Most Likely Best-Case Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities (Prob): Year 0 1 2 3 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 4 5 The year 5 values include salvage value. Heywood's corporate cost of capital is 10%. a. What is the project's expected (is, base case) NPV assuming average risk? (Hint: The base case net cash flows are the expected cash flows in each year.) Year E(Value) 0 1 2 3 4 5 Cost of Capital = 10% NPV: b. What are the project's most likely, worst-case, and best-case NPVs? Prob = .20 Prob. = .60 B Prob. = 20 NPV: A Worst-Case Most Likely Best-Case