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Pediatrics Partners is evaluating a project with the following net cash flows and probabilitites.... The Year...

Pediatrics Partners is evaluating a project with the following net cash flows and probabilitites.... The Year 5 value includes salvage value. Pediatrics Partners corporate capital of use is 12%. What is the projects expected NPV assuming average risk? What art the projects most likely, worse case, and best case NPV? What is the projects expected NPV on the basis of the scenario analysis? What i the projects standard deviation of NPV? Assume the managers judge the project to have higher than average risk, the practice's policy is to adjust the corporate cost of capital up or down by 2 % points to account for differential risk. Is the project financially attractive?

Year Prob. =0.25 Prob.=0.5 Prob.=0.25
0 ($75,000) ($75,000) ($75,000)
1 15,000 20,000 30,000
2 15,000 20,000 30,000
3 15,000 20,000 30,000
4 15,000 20,000 30,000
5 20,000 30,000 40,000

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