Solution-Computing the project expected annual cash flow

Computing the project expected annual cash flow

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Reference no: EM133069278

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

BPC has decided to evaluate the riskier project at 13% and the less-risky project at 8%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

Open spreadsheet

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

Project A: $ fill in the blank 2

Project B: $ fill in the blank 3

Project B's standard deviation (σ_B) is $5,797.84 and its coefficient of variation (CV_B) is 0.76. What are the values of (σ_A) and (CV_A)? Round your answers to two decimal places.

Reference no: EM133069278

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Computing the project expected annual cash flow

Reference no: EM133069278

Reference no: EM133069278

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