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Problem 11-15Risky Cash FlowsThe Bartram-Pulley Company (BPC) must decide between twomutually exclusive investment projects. Each project costs $7,500and has an expected life of 3 years. Annual net cash flows fromeach project begin 1 year after the initial investment is made andhave the following probability distributions:PROJECT APROJECT BProbabilityNet CashFlowsProbabilityNet CashFlows0.2$6,0000.2$ 0 0.66,7500.66,7500.28,0000.216,000BPC has decided to evaluate the riskier project at a 12% rateand the less risky project at a 8% rate.What is the expected value of the annual net cash flows fromeach project? Do not round intermediate calculations. Round youranswers to nearest dollar.Project AProject BNet cash flow$$What is the coefficient of variation (CV)? Do not roundintermediate calculations. (Hint:?B=$5,097 andCVB=$0.70.)? (to the nearest whole number)CV (to 2 decimal places)Project A$Project B$What is the risk-adjusted NPV of each project? Do not roundintermediate calculations. Round your answer to the nearest dollar.Project A$Project B$If it were known that Project B is negatively correlated withother cash flows of the firm whereas Project A is positivelycorrelated, how would this affect the decision?This would tend to reinforce the decisionto -Select-acceptrejectItem 9 Project B.If Project B's cash flows were negatively correlated with grossdomestic product (GDP), would that influence your assessment of itsrisk?-Select-YesNoItem 10
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