eBook

The Butler-Perkins Company (BPC) must decide between two mutually exclusive projects. Each project has an initial outflow of $7,000 and has an expected life of 3 years. Annual project cash flows begin 1 year after the initial investment and are subject to the following probability distributions:

Project A			Project B
Probability	Cash Flows		Probability	Cash Flows
0.2	$6,250		0.2	$ 0
0.6	7,000		0.6	7,000
0.2	7,750		0.2	19,000

BPC has decided to evaluate the riskier project at 13% and the less-risky project at 9%.

1. What is each project's expected annual cash flow? Round your answers to the nearest cent.

   Project A:	$
   Project B:	$

   Project B's standard deviation (_B) is $6,132 and its coefficient of variation (CV_B) is 0.77. What are the values of (_A) and (CV_A)? Do not round intermediate calculations. Round your answer for standard deviation to the nearest cent and for coefficient of variation to two decimal places.

   A:	$
   CVA: