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 12.2%, and they observe that the current risk-free rate of return is 7.3%. 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) 1 Project X Project Y $73,000 $80,000 Cash inflows (CFt) $31,000 $22,000 31,000 33,000 31,000 38,000 31,000 43,000 2 3 a. Use a risk-adjusted discount rate approach to calculate the net present value of each project, given that project X has an RADR factor of 1.24 and project Y has an RADR factor of 1.38. The RADR factors are similar to project betas. (Hint: Use the following equation to calculate the required project return for each: r=Rp+bx (m-RF) .) 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.)