3. The Walchand Company is considering two mutually exclusive projects. The expected cash flows and the associated certainty-equivalent coefficients for each project are as follows:

Project A Certainty Project B Certainty Year R) Equivalent (3) Equivalent B 5,000 1.00 -8,000 1.00 1 1,000 0.90 6,000 0.90 2 2,000 0.80 5,000 0.70 3 3,300 0.70 4,000 0.60 4 4,000 0.60 3,000 0.50 5 1,000 0.30 1,000 0.25 To account for the riskiness of the projects, the company uses the certainty-equivalent approach. Which of the two projects should be selected if the risk-free discount rate is 6 per cent? If the firm were to use risk-adjusted discount rates instead of certainty-equivalent approach, what rates would be used in order to obtain an equivalent solution?