Question

In: Finance

Please show all work, calculation, or explanation to receive full credit and circle the correct answer....

Please show all work, calculation, or explanation to receive full credit and circle the correct answer.

Use the following Information to Answer Problems 1 and 2

Bradford Services Inc. (BSI) is considering a project that has a cost of $10 million and an expected life of 3 years. There is a 30 percent probability of good conditions, in which case the project will provide a cash flow of $9 million at the end of each year for 3 years. There is a 40 percent probability of medium conditions, in which case the annual cash flows will be $4 million, and there is a 30 percent probability of bad conditions and a cash flow of -$1 million per year. BSI uses a 12 percent cost of capital to evaluate projects like this.

Problem 1: Find the project’s expected cashflow and NPV

Condition	Probability	Cash Flow	Prob.*Cash Flow
Good	0.3	$9
Medium	0.4	$4
Bad	0.3	-$1
		Expected CF

Expected CF =

	T=0	T=1	T=2	T=3
CF

NPV of Project =

What can you conclude regarding this project?

Problem 2: find the project’s standard deviation and coefficient variation?

Condition	Probability	NPV
Good	0.3
Medium	0.4
Bad	0.3
	Expected NPV

NPV of Project in Good Condition =

NPV of Project in Average Condition =

NPV of Project in Bad Condition =

Variance =

Coefficient Variation =

Expert Solution

VARIANCE, STANDARD DEVIATION AND COEFFICIENT OF VARIATION ROUNDED TO 4 DECIMALS

jeff jeffy answered 1 year ago

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