21. Certainty equivalents (S9.4) A project has a forecasted cash flow of $110 in year 1 and...
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21. Certainty equivalents (S9.4) A project has a forecasted cash flow of $110 in year 1 and $121 in year 2. The interest rate is 5%, the estimated risk premium on the market is 10%, and the project has a beta of 0.5. If you use a constant risk-adjusted discount rate, what is
a. The PV of the project?
b. The certainty-equivalent cash flow in years 1 and 2?
c. The ratio of the certainty-equivalent cash flows to the expected cash flow?
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Related Book For
Principles Of Corporate Finance
ISBN: 9781264080946
14th Edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans
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