Question 9 Chapter 11 redo

Risk-adjusted discount rates-Tabular After a careful evaluation of investment alternatives and opportunities, Masters School Supplies has developed a CAPM-type relationship linking a risk index to the required return (RADR), as shown in the table . The firm is considering two mutually exclusive projects, A and B. Following are the data the firm has been able to gather about the projects. All the firm's cash flows for each project have already been adjusted for taxes. a. Evaluate the projects using risk-adjusted discount rates. b. Discuss your findings in part (a), and recommend the preferred project. \begin{tabular}{cl} Risk index & \multicolumn{1}{c}{ Required return (RADR) } \\ \hline 0.0 & 7.5% (risk-free rate, RF ) \\ 0.2 & 8.4 \\ 0.4 & 9.3 \\ 0.6 & 10.2 \\ 0.8 & 11.1 \\ 1.0 & 12.0 \\ 1.2 & 12.9 \\ 1.4 & 13.8 \\ 1.6 & 14.7 \\ 1.8 & 15.6 \\ 2.0 & 16.5 \end{tabular}