Risky Cash Flows 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:

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 at 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 knowledge affect the decision? If Project B's cash flows were negatively correlated with gross domestic product (GDP), would that influence your assessment of itsrisk?

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Project A Project B Probability Ne Cash Flows Proity Net Cash Flows 0.2 0.6 0.2 6,000 6,750 7,500 0.2 0.0 0.2 6,750 18,000