David Monteg is considering building an amusement park that will require a net investment of $300,000 and yield the following net cash flows: Year 1 2 3 4 5 Net Cash Flows $150,000 100,000 70,000 50,000 20,000 Cert. Equiv. Factor 0.90 0.80 0.65 0.50 0.30 The following additional data is available: Cost of capital: 14%. Risk free rate: 8%. Risk Premium: 6%. What is the certainty equivalent NPV for this project? Is the Project acceptable or not? |