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Finance

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Use the following Information to Answer Problems 1and 2
Bradford Services Inc. (BSI) is considering a projectthat has a cost of $10 million and an expected life of 3 years.There is a 30 percent probability of good conditions, in which casethe project will provide a cash flow of $9 million at the end ofeach year for 3 years. There is a 40 percent probability of mediumconditions, in which case the annual cash flows will be $4 million,and there is a 30 percent probability of bad conditions and a cashflow of -$1 million per year. BSI uses a 12 percent cost of capitalto evaluate projects like this.
Problem 1: Find the project’s expected cashflow andNPV
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 andcoefficient 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 =

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Please show all work, calculation, or explanationto receive full credit and circle the correctanswer.Use the following Information to Answer Problems 1and 2Bradford Services Inc. (BSI) is considering a projectthat has a cost of $10 million and an expected life of 3 years.There is a 30 percent probability of good conditions, in which casethe project will provide a cash flow of $9 million at the end ofeach year for 3 years. There is a 40 percent probability of mediumconditions, in which case the annual cash flows will be $4 million,and there is a 30 percent probability of bad conditions and a cashflow of -$1 million per year. BSI uses a 12 percent cost of capitalto evaluate projects like this.Problem 1: Find the project’s expected cashflow andNPVConditionProbabilityCash FlowProb.*Cash FlowGood0.3$9Medium0.4$4Bad0.3-$1Expected CFExpected CF =T=0T=1T=2T=3CFNPV of Project =What can you conclude regarding this project?Problem 2: find the project’s standard deviation andcoefficient variation?ConditionProbabilityNPVGood0.3Medium0.4Bad0.3Expected NPVNPV of Project in Good Condition =NPV of Project in Average Condition =NPV of Project in Bad Condition =Variance =Coefficient Variation =

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

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