Problem 13-15 Risky Cash Flows

The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $6,250 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	$5,000	0.2	$ 0
0.6	6,750	0.6	6,750
0.2	7,500	0.2	19,000

BPC has decided to evaluate the riskier project at a 11% rate and the less risky project at a 8% rate.

1. What is the expected value of the annual net cash flows from each project? Round your answers to nearest dollar.

   	Project A	Project B
   Net cash flow	$	$

   What is the coefficient of variation (CV)? (Hint: B = $6,158 and CVB = 0.78.)

   	(to the nearest whole number)	CV (to 2 decimal places)
   Project A	$

3. What is the risk-adjusted NPV of each project? Round your answer to the nearest dollar.

   Project A		$
   Project B		$