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 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 S(Round to the nearest cent) Project Y $231,000 Cash inflows (CFt) $58,000 63,000 75,000 80,000 91,000 Project X $175,000 Project Z $313,000 Initial investment (CFo) Year (t) $78,000 71,000 58,000 61,000 59,000 $92,000 92,000 92,000 92,000 92,000 4 Risk Classes and RADRs Risk Class Description Lowest risk Below-average risk Average risk Above-average rislk Highest risk Risk adjusted discount rate (RADR) 10.4% 13.3 15.1 19.0 21.9 IV