1. Create a variable or set of variables that will introduce risk?and therefore a lack of certainty regarding the estimated cash flows?for each of the two investment projects.
2. Using the variable(s) selected in parta, take each annual cash flow and assign three possible dollar amounts given three scenarios: pessimistic, most likely, and optimistic. Let the dollar value you originally chose be the most likely amount, the pessimistic value be less than this amount, and the optimistic value be greater than this amount.
3. Calculate therangesof the NPVs between the pessimistic and optimistic outcomes, and determine which of the two projects is riskier.
4. Develop a simplified RADR by adjusting the discount rate originally chosen for the different levels of risk calculated in partc, and calculate therisk-adjusted NPVfor each project.
5. Using all of the analysis from Module 5 forum and Module 6 forum, and concentrating on the new risk-based information, choose which project your firm will implement and explain why. Be mindful that the reasons for the decision are as important as the choice of investment made by your group. View your final decision as an opportunity to defend your choice to a broader audience, perhaps the firm's board of directors.

ANAYLSIS FROM FORUM 5- Both projects are acceptable because NPV of both are positive which is goodfrom an investment point of view. As for the Payback period, project B can beselected because its slightly lower compared to project A. IRR of both projects is inthe same range, so by the IRR rule both can be chosen. But project A is higher so itwill have preference over project B. IRR rules also states that the IRR should beabove the cost of capital if a project needs to be selected. The major differencein these two projects is the initial investment and the revenue generation. If this isconsidered, then Project A is better choice since initial investment is low but therevenue generation is high so I pick project A.

Project A Cash flows Initial Inv $150,000.00 scount Ra Present value Year Project A 13.50% 0 -150000 1 -150000 1 40,000.00 0.135 $35,242.29 2 43,400.00 0.135 $33,689.77 47,140.00 0.135 $32,240.52 4 51,254.00 0.135 $30,884.77 5 55,779.40 0.135 $29,613.83 6 60,757.34 0.135 $28,419.97 7 66,233.07 0.135 $27,296.30 8 72,256.38 0.135 $26,236.71 9 78,882.02 0.135 $25,235.69 10 86,170.22 0.135 $24,288.38 NPV $143,148.01 Payback P 3.38 IRR 31.34%Project B Cash Flows Initial Investme $ 300,0 Discount Rate Present Value Year Project B 13.50% 0 -300000 -300000 1 84,0 0.135 74,008.81 92,4 0.135 71,726.60 101,6 0.135 69,514.77 4 111,8 0.135 67,371.14 5 122,9 0.135 65,293.62 135,2 0.135 63,280.16 148,8 0.135 61,328.78 CO 163,6 0.135 59,437.59 9 180,0 0.135 57,604.71 10 198,0 0.135 55,828.36 NPV $345,394.53 Payback Period 3.2