Question: Part C) First drop down options are Accept or Reject ; The secknf drop down options are Yes or No 0 0.6 The Bartram-Pulley Company
0 0.6 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 cash flows from each project begin 1 year after the initial investment is made and have the following probability distributions: Project A Project B Probability Cash Flows Probability Cash Flows 0.2 $6,000 0.2 $ 6,750 0.6 6,750 0.2 7,500 0.2 18,000 BPC has decided to evaluate the riskler project at a 10% rate and the less risky project at an 8% rate. a. What are the expected values of the annual cash flows from each project? Do not round intermediate calculations, Round your answers to the nearest dollar. Project A Project B Expected annual cash flow What is the coefficient of variation (CV) for each project? Do not round intermediate calculations. Round your answers to two decimal places. Project A Project B Coefficient of variation b. What is the risk-adjusted NPV of each project? Do not round intermediate calculations. Round your answers to the nearest cent. Project A Project B Risk-adjusted NPV c. 1 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? This would tend to reinforce the decision to Select- v Project B. If Project B's cash flows were negatively correlated with gross domestic product (GDP), would that influence your assessment of its risk? Select
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
