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The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $5,500 and has an expected life of 3 years. Annual
The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $5,500 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 Cash Flows Probability Cash Flows 0.2 $5,000 0.2 $ 0 0.6 6,750 0.6 6,750 0.2 7,500 0.2 21,000 BPC has decided to evaluate the riskier project at a 13% rate and the less risky project at a 10% rate. a. What is the expected value of the annual cash flows from each project? Do not round intermediate calculations. Round your answers to the nearest dollar. Project A Project B Net cash flow $ What is the coefficient of variation (CV)? (Hint: 08=$6,890.21 and CVB=$0.84.) Do not round intermediate calculations. Round o values to the nearest cent and CV values to two decimal places. CV $ Project A $ Project B b. What is the risk-adjusted NPV of each project? Do not round intermediate calculations. Round your answers to the nearest cent. $ Project A: Project B
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