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La Porta Corporation (LPC) is considering two mutually exclusive investment projects (AKA and ZETA). The initial investment of both projects is $3,350. The life of
La Porta Corporation (LPC) is considering two mutually exclusive investment projects (AKA and ZETA). The initial investment of both projects is $3,350. The life of both projects is ten years. The probability distribution of the cash flows of the projects is given as follows. LPC uses a WACC of 12.65% for less risky projects and a WACC of 13.40% for riskier projects (i.e., 1.75% risk premium). a) What are the standard deviation and the coefficient of variation of each project? A short interpretation is required. b) Calculate risk-adjusted NPV for each project. c) What project do you advise LPC to select? Please explain
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