Expected NPV and Risk. The administrator of ABC Hospital is considering the purchase of new operating room equipment at a cost of $7,500. The surgical staff has furnished the following estimates of...

Expected NPV and Risk. The administrator of ABC Hospital is considering the purchase of new operating room equipment at a cost of $7,500. The surgical staff has furnished the following estimates of useful life and cost savings. Each useful life estimate is independent of each cost savings estimate.

Years of Estimated Useful Life  Probability of Occurrence            Estimated Cost Savings Probability of Occurrence

4              0.25        $1.900  0.30

5              0.50        $2,000 0.40

6              0.25        $2,100   0.30

1.0                               1.00

Calculate (a) the expected net present value, allowing for risk and uncertainty and using a 10 percent discount rate, and (b) the standard deviation and coefficient of variation for the present value calculations of estimated cost savings before deducting the investment.