The Butler-Perkins Company (BPC) must decide between two mutually exclusive projects. Each costs $6,500 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	$5,750		0.2	$0
0.6	$6,500		0.6	$6,500
0.2	$7,250		0.2	$18,000

BPC has decided to evaluate the riskier project at 12% and the less-risky project at 8%.

What is each project's expected annual cash flow? Round your answers to two decimal places.

Project A: $

Project B: $

Project B's standard deviation (_B) is $5,822.37 and its coefficient of variation (CV_B) is 0.78. What are the values of (_A) and (CV_A)? Round your answers to two decimal places.

_A = $

CV_A =

Based on the risk-adjusted NPVs, which project should BPC choose?

_________Project AProject B

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?

_________This would make Project B more appealing.This would make Project B less appealing.

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?

_________This would make Project B more appealing.This would make Project B less appealing.