Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please answer all parts!! Risk-adjusted rates of return using CAPM Centennial Catering, Inc., is considering two mutualy exclusive investments. The company wishes fo use a

please answer all parts!! image text in transcribed
Risk-adjusted rates of return using CAPM Centennial Catering, Inc., is considering two mutualy exclusive investments. The company wishes fo use a CAPM-type riakadiusted discount rate (RADR) in its analysis. Centennials managers belave that the appropriate market rate of return is 11.6%, and they coserve that the current risk-free rate. of retum is 6.8%. Cash flows associated with the two projects are shown in the following table. (Click on the icon here of in order fo copy the contants of the data table beiow into a spreadsheet.) a. Use a risk-adfusted discount rate approach to calculate the net present value of each project, given that project X has an RADR factor of 1 .16 and project Y has an RADR factor of 1.42. The RADR factors are similar to project betas, (Hint: Use the following equation to calculate the required project return for each: r=RF+b(rmRF) ) b. Discuss your findings in part (a), and recommend the preferred project. a. The nisk-adiusted discount rate for proiect X will be %. (Round to two decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Principles And Practices

Authors: Sudhindra Bhat

2nd Edition

8174465863, 978-8174465863

More Books

Students also viewed these Finance questions

Question

What has been the evolution of HRM?

Answered: 1 week ago

Question

What would you do?

Answered: 1 week ago