Question: 15. The Cactus Corporation is considering a 2-year project, project A, involving an initial invest men t of $600 and the following (ash inflows and

15. The Cactus Corporation is considering a 2-year project, project A, involving an initial invest men t of $600 and the following (ash inflows and probabilities:

a. Calculate the project's expected NPV and standard deviation, assuming the discount rate to be 8 percent.
b. The company is also considering another 2-year project; project B, which has an expected NPV of $30 and a standard deviation of $125. Projects A and B are mutually exclusive. Which of the two projects would you prefer? Explain.

Year 1 Year 2 Probability 0.1 0.4 0.4 0.1 Cash Flow Probability Cash Flow $700 600 500 400 0.2 0.3 0.8 0.2 $600 500 400 300

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