Risk classes and RADR Moses Manufacturing is attempting to select the best of three mutually exclusive projects, X, Y, and Z. Although all the projects have

5-year

lives, they possess differing degrees of risk. Project X is in class V, the highest-risk class; project Y is in class II, the below-average-risk class; and project Z is in class III, the average-risk class. The basic cash flow data for each project and the risk classes and risk-adjusted discount rates (RADRs) used by the firm are shown in the following tables

a. Find the risk-adjusted NPV for each project.

b. Which project, if any, would you recommend that the firm undertake?

Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)

Project X

Project Y

Project Z

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Initial investment

(CF 0CF0)

$182,000

$233,000

$314,000

Year

(t t )

Cash inflows

(CF Subscript tCFt)

1

$83,000

$52,000

$85,000

2

75,000

66,000

85,000

3

65,000

76,000

85,000

4

61,000

80,000

85,000

5

55,000

91,000

85,000

Risk Classes and RADRs
Risk Class	Description	Risk adjusted discount rate (RADR)
I	Lowest risk	10.7%
II	Below-average risk	13.8
III	Average risk	15.7
IV	Above-average risk	19.8
V	Highest risk 22.9

a. Find the risk-adjusted NPV for each project. b. Which project, if any, would you recommend that the firm undertake? a. The net present value for project X is $ nothing . (Round to the nearest cent.)