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The Butler$-$Perkins Company $($BPC$)$ must decide between two mutually exclusive projects. Each project has an initial after$-$tax cash outflow of $$6,750$ and has an expected life of $3$ years. Annual project after$-$tax 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

$0\mathrm{.}2$ $$6,0000\mathrm{.}2$ $ $0$

$0\mathrm{.}66,7500\mathrm{.}66,750$

$0\mathrm{.}27,5000\mathrm{.}219,000$

BPC has decided to evaluate the riskier project at $12\%$ and the less$-$risky project at $9\%.$

What is each project's expected annual after$-$tax cash flow? Round your answers to the nearest cent.

Project A: $

Project B: $

Project B$\text{'}$s standard deviation $(\backslash$sigma B$)$ is $$6,158$ and its coefficient of variation $($CVB$)$ is $0\mathrm{.}78.$ What are the values of $\backslash$sigma A and CVA? Do not round intermediate calculations. Round your answer for standard deviation to the nearest cent and for coefficient of variation to two decimal places.

$\backslash$sigma A: $

CVA:

Based on the risk$-$adjusted NPVs$,$ which project should BPC choose?

Project B

If you knew that Project B$\text{'}$s cash flows were negatively correlated with the firm's other cash flows, but Project A$\text{'}$s cash flows were positively correlated, how might this affect the decision?

This would make Project B more appealing.

If Project B$\text{'}$s cash flows were negatively correlated with gross domestic product $($GDP$),$ while A$\text{'}$s cash flows were positively correlated, would that influence your risk assessment?

This would make Project B more appealing.

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