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Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities(Prob) Year Prob

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Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities(Prob)

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

3 20,000 30,000 30,000

4 20,000 30,000 40,000

5 20,000 40,000 50,000

The year 5 values include salvage value. Heywood's corporate cost of capital is 10 percent.

a) What is the project's expected (i.e. base case) NPV assuming average risk? (Hint: The base case net cash flows are the expected cash flows in each year)

b) What are the project's most likely, worst-case, and best-case NPVs?