Exercise 6.4 The diagram below gives the state-contingent cash flows Y for a two-period project that requires a $300 initial outlay. Also shown are the state-contingent risk-free rates of return Rf, and the state-contingent prices q of a comparison risky asset. What is the NPV of the project? (Hint: Work backwards by first calculating the state-contingent project values in year 1.) Y = $190,4 = $25 State C q= $22, Y = $180, Rf = 18% State A State D Y = $160, q = $20 q = $20, R = 15% Y = $160,4 = 22 State E q= $20, Y = $150, Ri= 10% State B State F Y = $130, q = $18 Year 0 Year 1 Year 2 Exercise 6.4 The diagram below gives the state-contingent cash flows Y for a two-period project that requires a $300 initial outlay. Also shown are the state-contingent risk-free rates of return Rf, and the state-contingent prices q of a comparison risky asset. What is the NPV of the project? (Hint: Work backwards by first calculating the state-contingent project values in year 1.) Y = $190,4 = $25 State C q= $22, Y = $180, Rf = 18% State A State D Y = $160, q = $20 q = $20, R = 15% Y = $160,4 = 22 State E q= $20, Y = $150, Ri= 10% State B State F Y = $130, q = $18 Year 0 Year 1 Year 2