Initial investment (CF) Year (t) 1 2 3 4 Project X Project Y $65,000 $76,000 Cash inflows (CFt) $32,000 $27,000 32,000 31,000 32,000 41,000 32,000 45,000 a. Use a risk-adjusted discount rate approach to calculate the net present value of each project, given that project X has an RADR factor of 1.23 and project Y has an RADR factor of 1.35. The RADR factors are similar to project betas. (Hint: Use the following equation to calculate the required project return for each: r=Rp+bx ('m-RF).) b. Discuss your findings in part (a), and recommend the preferred project. a. The risk-adjusted discount rate for project X will be %. (Round to two decimal places.) Enter your answer in the answer box and then click Check Answer. 4 parts romaining Clear All Final Check Risk-adjusted rates of return using CAPM Centennial Catering, Inc., is considering two mutually exclusive investments. The company wishes to use a CAPM-type risk-adjusted discount rate (RADR) in its analysis. Centennial's managers believe that the appropriate market rate of return is 12.4%, and they observe that the current risk-free rate of return is 7.5%. Cash flows associated with the two projects are shown in the following 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) Year (t) 1 2 3 4 Project X Project Y $65,000 $76,000 Cash inflows (CF) $32,000 $27,000 32,000 31,000 32,000 41,000 32,000 45,000 a. The risk-adjusted discount rate for project X will be %. (Round to two decimal places.)