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200,000

A. Calculate the expected value, standard deviation, and coefficient of variation of cash flows for each project.

B. Calculate the risk-adjusted NPV for each project using a 15% cost of capital for the riskier project and a 12% cost of capital for the less risky one. Which project is preferred using the NPV criterion?

C. Calculate the PI for each project, and rank the projects according to the PI criterion.

D. Calculate the IRR for each project, and rank the projects according to the IRR criterion.

E. Compare your answers to parts B, C, and D, and discuss any differences.

P15.8 Cash Flow Estimation. Cunningham's Drug Store, a medium-size drugstore located in Milwaukee, Wisconsin, is owned and operated by Richard Cunningham. Cunningham's sells pharmaceuticals, cosmetics, toiletries, magazines, and various novelties. Cunningham's most recent annual net income statement is as follows:

Sales revenue

$1,800,000

Total costs

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