The Bartram-Pulley Company (BPC) must decide between two mutually exclusive inve

Question

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 flow 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 flows probability Net cash flows 0.2 6,000 0.2 $ 0 0.6 6,750 0.6 6,750 0.2 7,500 0.2 18,000 BPC has decided to evaluate the riskier project at a 12% rate and the less risky project at a 10% rate Question: b- What is the risk adjusted NPV of each project? Answers: NPVA=$ 10,036 NPVB= $ 11,624 I need the work to the solution

Explanation / Answer

Prob.ablity and cashflow given in problem is not clear but i have summerized in table format as much possible.

A B Year Prob. CF Prob. CF 1 0.20 $6,000.00 0.20 $0.00 2 0.60 $6,750.00 0.60 $6,750.00 3 0.20 $7,500.00 0.20 $18,000.00

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