Question
A project has a forecasted cash flow of $117 in year 1 and $128 in year 2. The interest rate is 8%, the estimated risk
A project has a forecasted cash flow of $117 in year 1 and $128 in year 2. The interest rate is 8%, the estimated risk premium on the market is 11.75%, and the project has a beta of 0.57. If you use a constant risk-adjusted discount rate, answer the following:
- What is the PV of the project?
- What is the certainty-equivalent cash flow in year 1 and year 2?
- What is the ratio of the certainty-equivalent cash flows to the expected cash?
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Accounting Principles
Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso
12th edition
1119132223, 978-1-119-0944, 1118875052, 978-1119132226, 978-1118875056
