Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / Risky Cash Flows The Bartram-Pulley Company (BPC) must decide between two mutually exclus...

Risky Cash Flows The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $6,250 and has an expected life of 3 years. Annual net cash flows

Risky Cash Flows

The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $6,250 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
Flows
Probability Net Cash
Flows
0.2 $6,000 0.2 $ 0
0.6 6,750 0.6 6,750
0.2 8,000 0.2 17,000

BPC has decided to evaluate the riskier project at a 11% rate and the less risky project at a 10% 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)? (Hint: ÏƒB = $5,444 and CVB = 0.73.)

  σ (to the nearest whole number) CV (to 2 decimal places)
Project A $  


What is the risk-adjusted NPV of each project? Round your answer to the nearest dollar.

Project A   $
Project B   $

May 20 2021 View more View Less

Answer (Solved)

question Subscribe To Get Solution

Related Questions