Problem 15.2

Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities:

Year Prob = 0.2 Prob = 0.6 Prob = 0.2

0 (100,000) (100,000) (100,000)

1 20,000 30,000 40,000

2 20,000 30,000 40,000

4 20,000 30,000 40,000

5 30,000 40,000 50,000

c. What is the projects expected NPV on the basis of the scenario analysis?

d. What is the projects standard deviation of NPV?