Consider the following two statistically independent projects, i.e., the cash flows between these projects are not correlated.

Project 1.

PW(10%) = 20 X + 8 XY, where X and Y are statistically independent discrete random variables with the following distributions:

X (Price)		Y (Volume)
Event	Probability	Event	Probability
$20	0.6	10	0.4
$40	0.4	20	0.6

Project 2

PW(10%)	Probability
$0	0.24
$400	0.20
$1,600	0.36
$2,400	0.20

a) Develop the NPW distribution for project 1.

b) Compute the mean and variance of the NPW for project 1.

c) Compute the mean and variance of the NPW for project 2.

d) Suppose projects 1 and 2 are mutually exclusive. Which project would you select?