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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 .3 $9

medium .4 $4

bad .3 -$1

Expected cash flow

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

CF=

NPV of Project=

What can you conclude?