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Risk adjusted NPV

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The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $6,750 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 Flow Probability Net Cash Flow
0.2 $5,000 0.2 $0
0.6 6,750 0.6 6,750
0.2 7,000 0.2 17,000

BPC has decided to evaluate the riskier project at a 11 percent rate and the less risky project at a 10 percent rate.

a. What is the expected value of the annual net cash flows from each project? What is the coefficient of variation (CV)? Round the answers to the nearest hundredth

b. What is the risk-adjusted NPV of each project? Round the answers to the nearest hundredth.

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