Question: The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $5,500 and has an expected life of 3 years. Annual
The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $5,500 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: Project A Project B Probability 0.2 0.6 0.2 BPC has decided to evaluate the riskier project at a 13% rate and the less risky project at a 8% rate. ProbabilityCash Flows Cash Flows 0.2 0.6 0.2 $5,000 6,750 6,750 20,000 a. What is the expected value of the annual cash flows from each project? Do not round intermediate calculations. Round your answers to the nearest dollar Project A Project B Net cash flow What is the coefficient of variation (CV)? (Hint: op-$6,522 and CVp $0.81) Do not round intermediate calculations. Round o values to the nearest cent and CV values to two decimal places cv Project A Project B 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
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