Project Alpha offers the following net cash flows following an initial (year 0), certain outlay (NINV) of

Question:

Project Alpha offers the following net cash flows following an initial (year 0), certain outlay (NINV) of $70,000:

a. Compute the NPV of this project at a 17 percent cost of capital.
b. If the risk-free rate is 8 percent, what is the certainty equivalent NPV for ProjectAlpha?

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Contemporary Financial Management

ISBN: 9780324289114

10th Edition

Authors: James R Mcguigan, R Charles Moyer, William J Kretlow

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Question Posted: Jul 17, 2012 02:44 AM

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Project Alpha offers the following net cash flows following an initial (year 0), certain outlay (NINV) of

Question:

Year Net Cash Flow ertainty Equivalent Factor $30,000 30,000 30,000 20,000 20,000 10,000 0.9 0.79 0.65 0.52 0.40 0.30

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a NPV calculation NPV 70000 30000855 30000731 ...View the full answer

Contemporary Financial Management

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