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 120%, and they observe that the current risk-free rate of return is 70% 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.) Project X Project Y Initial investment (CF) $70,000 $78,000 Year (1) Cash inflows (CF) $30,000 $22.000 30,000 32.000 30,000 38,000 30,000 46,000 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 120 and project Y has an RADR factor of 1.40. The RADR factors are similar to project betas. (Hint: Use the following equation to calculate the required project return for each r=Rp+bx (im -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 Y is (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 The RADR approach is most often used in business The RADR approach combines the risk adjustment and the time adjustment in a single value