financial manegmnent

Help Save Sheila Goodman recently received her MBA from the Harvard Business School. She has joined the family business, Goodman Software Products Inc, as Vice-President of Finance. She believes in adjusting projects for risk. Her father is somewhat skeptical but agrees to go along with her. Her approach is somewhat different than the risk-adjusted discount rate approach, but achieves the same objective She suggests that the inflows for each year of a project be adjusted downward for lack of certainty and then be discounted back at a risk-free rate. The theory is that the adjustment penalty makes the inflows the equivalent of riskless inflows, and therefore a risk-free rate is justified A table showing the possible coefficient of variation for an inflow and the associated adjustment factor is shown next coefficient of Adjustment Factor 0.90 Variation 0 -0.25 0.26 - 0.50 0.51 0.75 0.76 - 1.00 1.03 - 1.25 0.70 0.60 0.50 Assume a $160,000 project provides the following inflows with the associated coefficients of variation for each year, Year 1 inflow $30,700 50,300 76.900 61.100 66.600 Coefficient of Vaelation 0.10 0:27 0.43 0.73 O COLLOW HUIS a. Fill in the table below (Do not round intermediate calculations. Round "Adjustment Factor" answers to 2 decimal places and other answers to the nearest whole dollar.) Year Adjustment Factor Adjusted Inflow 1 2 3 4 5 b-1. If the risk-free rate is 6 percent, compute the net present value of the adjusted inflows (Negative amount should be indicated by o minus sign. Do not round Intermediate calculations and round your answer to 2 decimal places.) Not present value b-1. If the risk-free rate is 6 percent, compute the net present value of the adjusted inflows. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value 1-2 Should this project be accepted? No o Yes