A-D
1 Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Initial investment (CF) Project ( EF G $15,000 $11,000 $19,000 Cash inflows (CF) $6,000 $6,000 $4,000 6,000 4,000 6,000 6,000 5,000 8,000 6,000 2,000 12,000 1.80 1.00 0.60 Risk index (RI) Risk-adjusted discount rates-Basic Country Wallpapers is considering investing in one of three mutually exclusive projects, E, F, and G. The firm's cost of capital,r, is 15.0% and the risk-free rate, Rp. is 100% The firm has gathered the following basic cash flow and risk index data for each project a. Find the nel present value (NPV) of each project using the firm's cost of capital Which project is preferred in this situation? b. The firm uses the following equation to determine the risk-adjusted discount rate, RADR for each project RADR =RE+RI* (r-RF) where RF = risk-free rate of return, RI - risk index for project, and r = cost of capital Substitute each project's risk index into this equation to determine its RADR c. Use the RADR for each project to determine its risk-adjusted NPV Which project is preferable in this situation? d. Compare and discuss your findings in parts (a) and (c) Which project do you recommend that the firm accept? a. Find the not present value (NPV) of each project using the firm's cost of capital The net present value for project Eis (Round to the nearest cent) The net present value for project Fiss (Round to the nearest cent) The net present value for project G is $ (Round to the nearest cent) Which project is preferred in this situation? (Select from the drop-down menu.) Project with the highest NPV, is preferred b. The form uses the following equation to determine the risk odunted discount rate. PADR for each b. The firm uses the following equation to determine the risk-adjusted discount rate, RADR for each project RADR, = RF+ RI* (-RE) where Re = risk-free rate of return, RI = risk index for project ), and r = cost of capital The RADR for project E is The RADR for project Fis The RADR for project G is %. (Round to two decimal places) % (Round to two decimal places) %. (Round to two decimal places.) c. Use the RADR for each project to determine its risk-adjusted NPV The risk-adjusted net present value for project Eis (Round to the nearest cent) The risk-adjusted not present value for project F is (Round to the nearest cent) The risk-adjusted not present value for project is (Round to the nearest cent.) Which project is preferable in this situation? (Select from the drop-down menu) Project will be preferable. d. Compare and discuss your findings in parts (a) and (c) Which project do you recommend that the firm accept? (Select from the drop-down menu) After adjusting the discount rate, even though all projects are still acceptable, the ranking changes. Project should be chosen has the highestniskodusted NPV and
