Excel Online Structured Activity: Project risk analysis A-Z The Butler-Perkins Company (BPC) must decide between two mutually exclusive projects. Each costs $7,000 and has an expected life of years. Annual project cash flows begin 1 year after the initial investment and are subject to the following probability distributions Project A Project B Probability Cash Flows Probability Cash Flows 0.2 $6,500 0.2 $0 0.6 $7,000 0.6 $7,000 $19,000 0.2 57,500 0.2 BPC has decided to evaluate the riskler project at 12% and the less-risky project at 9%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. X Open spreadsheet NO a. What is each project's expected annual cash flow? Round your answers to two decimal places. 5 Project A:s A-Z Project B: 5 Project B's standard deviation () is $6,131.88 and its coefficient of variation (CV) is 0.77. What are the values of (o) and (CVAIZ Round your answers to two decimal places. DA5 CVA b. Based on the risk-adjusted NPVS, which project should BPC choose? c. If you knew that Project B's cash flows were negatively correlated with the firm's other cash now, but Project A's cash flows were positively correlated, how might this affect the decision? IT Project B's cash nows were negatively correlated with gross domestic product (GDP), while A's casions were positively correlated would that influence your risk assessment? B D $7,000.00 3 $500.00 Cash Flows 58,500.00 $7,000.00 $7,500.00 1 Project risk analysis 2 3 Costs, Projects A and B 4 Expected life of projects in years) 5 Difference between Project A CFS 6 7 Project A: 8 Probability 9 0.2 10 0.6 11 0.2 12 13 Project 14 Probability 15 0.2 16 0.6 17 0.2 18 19 Discount rate, nisky project 20 Discount rate, less risky project 21 22 Calculation of Expected CF, SD and CV 23 Project A 24 Expected annual cash flow RESS Cash Flows $0.00 $7,000.00 Si 300.00 12.00% 9.00% Formulas ANIA