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A project has an expected risky cash flow of $600 in years 1, 2 and 3. The risk-free rate is 4 percent, the expected market
A project has an expected risky cash flow of $600 in years 1, 2 and 3. The risk-free rate is 4 percent, the expected market rate of return is 14 percent, and the project's beta is 1.10. (A) Calculate the certainty equivalents cash flow for years 1, 2 and 3 (CEQ). (B) What are the differences between the CEQs and risky cash flows for years 1, 2, 3? (C) What is the PV of the CEQs for years 1, 2, 3
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