Question
L6. Only answer the bolded question please :) The Butler-Perkins Company (BPC) must decide between two mutually exclusive projects. Each project has an initial outflow
L6. Only answer the bolded question please :)
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 | |
Probability | Cash Flow |
0.2 | $6,250 |
0.6 | $7,000 |
0.2 | $7,750 |
Project B | |
Probability | Cash Flow |
0.2 | 0 |
0.6 | 7,000 |
0.2 | 17,000 |
BPC has decided to evaluate the riskier project at 11% and the less-risky project at 9%.
- What is each project's expected annual cash flow? Round your answers to the nearest cent.
Project A: $7000
Project B: $7600
A. Project B's standard deviation (B) is $5,426 and its coefficient of variation (CVB) is 0.71. What are the values of (A) and (CVA)? 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:
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