3 The ‘wood pulp’ project has an initial cost of £13,000 and the firm’s risk-free interest rate is 10 per cent. If certainty equivalents and net cash flows (NCF) for the project are as below, should the project be accepted?

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Year Certainty equivalents Net cash flows () 1234567 0.90 8,000 0.85 7,000 0.80 7,000 0.75 5,000 0.70 5,000 0.65 5,000 0.60 5,000