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Your firm is considering two independent projects. Project A has a cost of $11,000 and Project B has a cost of $14,000. The probability distribution and cash flows generated by each project are presented below. The company's cost of capital is 10 percent. Year Project A Cash Flows. Prob. Year Project B Cash Flows Prob. 1 $ 9,000 .3 1 $ 7,500 .2 2 15,000 .4 2 10.000 .3 3 9,000 .3 3 10,000 .3 4 7,500 .2

a. Calculate the expected value of the above two projects.

b. Calculate the risk of Project A.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91776876

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