Singleton Company: Project Cash Flows and Risk
The Singleton Company must decide between two mutually exclusive investment projects. Each project costs $ 6,750 and has an expected life of three years. Annual net cash flows from each project begin one year after the initial investment is made and have the following probability.
Please view attachment for Project A & B
Singleton has decided to evaluate the riskier project at 12% rate and the less risky project at 10% rate.
a. What is the expected value of the annual net cash flows from each project?
What is the coefficient of variation (CVnpv)?
b. What is the risk-adjusted NPV of each project?© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/business-management/singleton-company-project-cash-flows-and-risk-2t1
...ty. It is the standard deviation divided by the mean. The mean in this case is the expected yearly return for the project (above).
Take the standard deviation of .2*$6000,.6*$6750,.2*7500 for A and .2*0, .6*$6750,.2*$18000 for B.
I used Excel to do the calculations which yielded approx 2220 for B and 1566 for ...