Question 1. A project costs 12,000 and the risk free discount rate in this country is 10%. The only cash flows are for years 1 and 2 as follows. Certainty equivalent cash flows have been estimated from interviews with managers. Year 1 2 6545.455 4917.355 11462.81 Net cash flow () ? 8,000 7000 Explain why you would decide not to invest in this project? Hint: 7272.727 5785.124 13057.85 certainty equivalent () 7,200 X 5,950

A project costs 12,000 and the risk free discount rate in this country is 10%. The only cash flows are for years 1 and 2 as follows. Certainty equivalent cash flows have been estimated from interviews with managers. Explain why you would decide not to invest in this project? Hint: A project costs 12,000 and the risk free discount rate in this country is 10%. The only cash flows are for years 1 and 2 as follows. Certainty equivalent cash flows have been estimated from interviews with managers. Explain why you would decide not to invest in this project? Hint