Risk$-$adjusted discount$$ rates: Basic$$Country Wallpapers is considering investing in one of three mutually exclusive$$ projects, E$,$ F$,$ and G$.$ The$$ firm's cost of$$ capital, r Subscript m Baseline$,$ is $10\mathrm{.}4\%,$ and the$$ risk$-$free rate, Upper R Subscript Upper F$,$ is $1\mathrm{.}5\%.$ The firm has gathered the following basic cash flow and risk index data for each project $($see table.$)$

a$.$ Find the net present value$($NPV$)$ of each project using the$$ firm's cost of capital. Which project is preferred in this$$ situation?

b$.$ The firm uses the following equation to determine the$$ risk$-$adjusted discount$$ rate, RADR Subscript j$,$ for each project nbsp j$$:

RADR Subscript j equals Upper R Subscript Upper F plus beta Subscript j times left parenthesis r Subscript m Baseline minus Upper R Subscript Upper F right parenthesis

where Upper R Subscript Upper F $=$ risk$-$free rate of$$ return, beta Subscript j $=$ beta of project nbsp j$,$ and r Subscript m Baseline $=$ expected return on market portfolio$=10\mathrm{.}4\%.$

Substitute each$$ project's beta into this equation to determine its RADR.

c$.$ Use the RADR for each project to determine its $$risk$-$adjusted NPV$.$ Which project is preferable in this$$ situation?

d$.$ Compare and discuss your findings in parts $($a$)$ and $($c$).$Which project do you recommend that the firm$$ accept?Data table

$($Click on the icon here $$ in order to copy the contents of the data table below into

a spreadsheet.$)$