Risk-adjusted rates of return using CAPM Centennial Catering, Inc., is considering two mutually exclusive investments. The company wishes to use a CAPM-type risk-adjusted discount rate (RADR) in its analysis. Centennial's managers believe that the appropriate market rate of return is 11.8%, and they observe that the current risk-free rate of return is 6.7%. Cash flows associated with the two projects are shown in the following table. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Initial investment (CF) Year (t) Project x Project Y $72,000 S83,000 Cash inflows (CF) $27,000 S27.000 27,000 34,000 27,000 33,000 27,000 43,000 3 4 a. Use a risk-adusted discount rate approach to calculate the net present value of each proiect, alven that proiect X has an RADR factor of 1.23 and protect Y has an RADR factor of 1.39. The RADR factors are similar to proiect betas. a. The risk-adjusted discount rate for project X will be%. (Round to two decimal places.) The risk-adjusted discount rate for project will be. (Round to two decimal places.) The net present value project X is $(Round to the nearest cent.) The net present value for project is S. (Round to the nearest cent.) b. Discuss your findings in part (a), and recommend the preferred project. (Select from the drop-down menus.) The RADR approach prefers project over project 7. The RADR approach combines the risk adjustment and the time adjustment in a single value. The RADR approach most often used in business. Initial investment (CF) Year (0) Project X Project Y $72,000 $83.000 Cash inflows (CF) $27,000 $27,000 27,000 34.000 27,000 33,000 27,000 43,000 N 3 a. Use a risk-adjusted discount rate approach calculate the net present value of each project, given that project X has an RADR factor of 1.23 and project Y has an RADR factor of 1,39. The RADR factors are similar to project betas. (Hint: Use the following equation to calculate the required project retum for each: r=Rp+bx (RE).) b. Discuss your findings in part (a), and recommend the preferred project. a. The risk-adjusted discount rate for project X will be %. (Round to two decimal places.) The risk-adjusted discount rate for project will be %. (Round to two decimal places.) The net present value for project X is $ (Round to the nearest cent.) The net present value for project is S (Round to the nearest cent) b. Discuss your findings in part (a), and recommend the preferred project. (Select from the drop-down menus.) The RADR approach prefers project over project V. The RADR approach combines the risk adjustment and the time adjustment in a single value. The RADR approach is most often used in business