Question
The Bartram-Pulley company must decide between two mutually exclusive investment projects. Each project costs $6,750 and has an expected like of 3 years. Annual net
The Bartram-Pulley company must decide between two mutually exclusive investment projects. Each project costs $6,750 and has an expected like of 3 years. Annual net cash flows from each project design begin 1 year after the initial investment is made and have the following probability distributions:
BPC has decided to evaluate the riskier project at a 12% rate and the less risky project at a 10% rate.
What is the risk-adjusted NPV of each project?
*The answers are NPVA= $10,036 NPVB=$11,624
I need to find out the calculations to get each number- please help!
1 Project cost 2 Life expectancy $6,750 3 years Riskier Less risky 12% 10% Project A Project B 6Probability Net Cash Flows $6,000 $6,750 $7,500 Probability 0.2 0.6 0.2 $1,200 $4,050.00 $1,500 0.2 0.6 0.2 Net Cash Flows $0 $6,750 $18,000 $0 $4,050 $3,600 0 2 Standard Deviation 3 CV 4 Risk adjusted NPV- 6,750.00 474.341649 $7,650 $5,798 0.76 0.0703Step by Step Solution
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