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The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $6,750 and

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The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $6,750 and has an expected life of 3 years. Annual net cash flows from each project begin 1 year after the initial investment is made and have the following probability distributions

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BPC has decided to evaluate the riskier project at a 12% rate and the less risky project at a 10% rate.a. What is the expected value of the annual net cash flows from each project? What is the coefficient of variation (CV)?b. What is the risk-adjusted NPV of each project?c. If it were known that Project B is negatively correlated with other cash flows of the firm whereas Project A is positively correlated, how would this affect the decision? If Project B's cash flows were negatively correlated with gross domestic product (GDP), would that influence your assessment of its risk?

Transcribed Image Text:

Project A Net Cash Flows Project B Net Cash Flows Probability Probability 0.2 0.2 S 6,000 6,750 7,500 6,750 18,000 0.6 0.6 0.2 0.2

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a Expected annual cash flows CVA 474346750 00703 CVB 5797847650 07579 b Project B is the riskier pro...View the full answer


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After completing my bachelors in Mechanical engineering i was tutoring other engineering students and also xii students to excel in their exams i was also taking ielts class in order to apply for masters degree in Germany. I tutored mostly college students and elementary school students privately after school and during the summer. We met in their homes or at the public library. I provided any necessary materials. I never had to advertise — word of mouth was how most folks knew of me. I stayed very busy, especially in the summers, and always had a full schedule. I typically met with each student's teacher in order to get an idea of what the focus of my instruction/remediation should be. Becoming familiar with the student's learning style(s) was also very helpful. I thoroughly enjoy teaching a class in a school situation. My students and I had fun, and grew quite fond of one another.I had to take a break from tutoring due to academic constrictions and i miss my students very much.
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NPV stands for \"Net Present Value,\" which is a financial concept used to determine the value of an investment or project. It measures the difference between the present value of cash inflows and the present value of cash outflows over a given period of time, using a specific discount rate. To calculate the NPV of an investment, you need to first estimate the cash inflows and outflows associated with the investment, and then discount them back to their present values using a discount rate. The discount rate represents the cost of capital or the expected rate of return required by investors. The formula for calculating NPV is: NPV = sum of (cash inflows / (1 + discount rate)^t) - sum of (cash outflows / (1 + discount rate)^t) Where: Cash inflows: the expected cash received from the investment Cash outflows: the expected cash paid out for the investment Discount rate: the required rate of return or the cost of capital t: the time period in which the cash flow occurs If the NPV is positive, it means that the investment is expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a good investment. If the NPV is negative, it means that the investment is not expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a bad investment.

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