Problem 11 15 Risky Cash Flows The Bartram Pulley Company (BPC) must decide between two mutually exclusive investment projects Each project costs $7,000 and has an expected life of 3 years Annual net cash flows from each project begin 1 year after the initial investment is made and have the following probability distributions PROJECT A PROJECT B Probability Net Cash Flows Probability Net Cash Flows 0 2 $6,000 0 2 $ 0 0 6 6,750 0 6 6,750 0 2 7,000 0 2 16,000 BPC has decided to evaluate the riskier project at a 13 rate and the less risky project at a 8 rate What is the expected value of the annual net cash flows from each project Do not round intermediate calculations Round your answers to nearest dollar Project A Project B Net cash flow $ $ What is the coefficient of variation (CV) Do not round intermediate calculations ( Hint B $5,097 and CV B $0 70 ) (to the nearest whole number) CV (to 2 decimal places) Project A $ Project B $ What is the risk adjusted NPV of each project Do not round intermediate calculations Round your answer to the nearest dollar Project A $ Project B $

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Problem 11-15 Risky Cash Flows The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $7,000 and has an expected

Problem 11-15 Risky Cash Flows

The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $7,000 and has an expected life of 3 years. Annual net cash flows from each project begin 1 year after the initial investment is made and have the following probability distributions:

PROJECT A		PROJECT B
Probability	Net Cash Flows	Probability	Net Cash Flows
0.2	$6,000	0.2	$ 0
0.6	6,750	0.6	6,750
0.2	7,000	0.2	16,000

BPC has decided to evaluate the riskier project at a 13% rate and the less risky project at a 8% rate.

What is the expected value of the annual net cash flows from each project? Do not round intermediate calculations. Round your answers to nearest dollar.

Project A Project B

Net cash flow $ $

What is the coefficient of variation (CV)? Do not round intermediate calculations. (Hint: _B=$5,097 and CV_B=$0.70.)

(to the nearest whole number) CV (to 2 decimal places)

Project A $

Project B $
What is the risk-adjusted NPV of each project? Do not round intermediate calculations. Round your answer to the nearest dollar.

Project A $

Project B $