Risk adjusted NPV
Not what you're looking for?
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.
Purchase this Solution
Solution Summary
The solution explains how to calculate the risk adjusted NPV
Purchase this Solution
Free BrainMass Quizzes
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Introduction to Finance
This quiz test introductory finance topics.
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media