line Activity. Project risk analysis Excel Online Structured Activity: Project risk analysis The Butler-Perkins Company (EPC) must decide between two mutually exclusive projects. Each costs $6,750 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 $6,500 0.2 $0 0.6 $6,750 0.6 $6,750 0.2 $7,000 0.2 $18,000 BPC has decided to evaluate the riskler project at 12% and the less-risky project at 9%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. What is each project's expected annual cash flow? Round your answers to two decimal places. Project A: 5 Project 3:5 Project B's standard deviation () is $5,797.84 and its coefficient of variation (CV) is 0.76. What are the values of (a) and (CV) Round your answers to two decimal places. Online Activity Project risk analysis Open spreadsheet A-Z a. What is each project's expected annual cash flow? Round your answers to two decimal places. Project A: $ Project : $ Project B's standard deviation () is $5,797.84 and its coefficient of variation (CV) is 0.76. What are the values of (A) and (CV)? Round your answers to two decimal places. DAS CVA b. Based on the risk-adjusted NPVs, which project should BPC choose? c. If you knew that Project B's cash flows were negatively correlated with the firm's other cash flow, but Project A's cash flows were positively correlated, how might this affect the decision? orang If Project B's cash flows were negatively correlated with gross domestic product (GDP), while A's cash flows were positively correlated, would that influence your risk assessment? Next Arial 10 * ' ' Currency MIMIII IMI I ilil MA Paste BIUD A $% % 68 % Insert Conditional Format Cell Formatting Table Styles Tables Undo Clipboard Font Alignment Number B24 D F Project risk analysis Costs, Projects A and B Expected life of projects in years) Difference between Project A CFS $6,750.00 3 $250.00 Project A Probability 0.2 Cash Flows $6,500.00 $6.750.00 $7,000.00 Cash Flows $0.00 6,750.00 $18,000.00 10 0.6 11 0.2 12 13 Project B Probability 15 0.2 16 0.6 17 02 18 19 Discount rate project 20 Discount rate, loss risky project 21 22 Calculation of Expected CF, SD and CV. 23 Project A 24 Expected annual cash flow 25 Standard deviation (50) 26 Coefficient of variation (CV) 22 28 Pro Sheets + Calculation Model 12.00% 9.00% Formulas UNA WNA WNA File A 13 condhand format nur Diet Ford Sud $ - % 9H E F H 1 1 C D 9.005 Formulas A NA NA 20 Discount Pro 23 22 Callion of Expected CF, SD and CV 21 A 24 Expected show 25 Savon (SD) todon (CV) 27 21 Pand 2. Expected mach fow 30 mard von (0) De CV 12 1 Which pros? > P A doute MEA 39.000 BOIVIO NA NA Calculation of Adid NPV NOVA NPV. Which would be NA WNA IVA 4 Sheet1