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 12.1%, and they observe that the current risk-free rate of return is 7.1%. 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 $71,000 Project Y $84,000 Initial investment (CF) Year (t) 1 $32,000 $22,000 2 32,000 37,000 3 32,000 38,000 4 32,000 49,000 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 1.22 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=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 %. (Round to two decimal places.) Cash inflows (CFt) a. The risk-adjusted discount rate for project X will be %. (Round to two decimal places.) The risk-adjusted discount rate for project Y 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 combines the risk adjustment and the time adjustment in a single value. The RADR approach is most often used in business