Question: The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $7,500 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 $7,500 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 | Net Cash Flow | Probability | Net Cash Flow |
| 0.2 | $6,000 | 0.2 | $ 0 |
| 0.6 | 6,750 | 0.6 | 6,750 |
| 0.2 | 7,000 | 0.2 | 16,000 |
BPC has decided to evaluate the riskier project at a 11% rate and the less risky project at a 8% rate.
What is the expected value of the annual net cash flows from each project? Round your answers to nearest dollar.
| Project A | Project B | |
| Net cash flow | $ | $ |
What is the coefficient of variation (CV)?
| (to the nearest whole number) | CV (to 2 decimal places) | |
| Project A | $ | |
| Project B | $ |
What is the risk-adjusted NPV of each project? Round your answer to the nearest dollar.
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