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 6.5%. Cash flows associated with the two projects are shown in the following table. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Initial investment (CF) Year (t) Project X Project Y $72,000 $76,000 Cash inflows (CFt) $33,000 $22,000 33,000 32,000 33,000 36,000 33,000 44,000 1 2 3 4 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 1.18 and project Y has an RADR factor of 1.45. The RADR factors are similar to project betas. (Hint: Use the following equation to calculate the required project return for each: r=RF+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 13.22 %. (Round to two decimal places.) The risk-adjusted discount rate for project Y will be 14.76 %. (Round to two decimal places.) The net present value for project X is $ (Round to the nearest cent.)