1. A five-year software development project is forecast to have net cash inflows of $15,000, $20, 000, $25,000, $30,000, and $50,000 in the next five years. It will cost $80,000 to implement the project, payable at the beginning of the project. There is an assumed inflation rate of .02 each of the five years for this project. If the required rate of return is .05, construct a discounted cash flow model to determine the NPV. Use the concepts found in Mantel, Chapter 1, Section 1.5 and Excel to create the formulas needed to calculate the NPV.

2. Now that you have the NPV calculated for this project, assume that the net cash inflows are probabilistic variables. Further, assume that each forecast net inflow is normally distributed with standard deviations of $500, $1,000, $1,500, $2,000, and $3,500, respectively. Your inflation rate is also normally distributed and has a standard deviation of .01. Given a required rate of return of .05 and the inflation rate of .02, find the mean forecast NPV using Crystal Ball. What is the probability that the actual NPV will be between $33,000 and $40,000?