Sheila Goodman recently received her MBA from the Harvard Business School. She has joined the family business, Goodman Software Products Inc, as Vice-President of Finance. She believes in adjusting projects for risk. Her father is somewhat skeptical but agrees to go along with her. Her approach is somewhat different than the risk-adjusted discount rate approach, but achieves the same objective She suggests that the inflows for each year of a project be adjusted downward for lack of certainty and then be discounted back at a risk-free rate. The theory is that the adjustment penalty makes the inflows the equivalent of riskless inflows, and therefore a risk-free rate is justified. A table showing the possible coefficient of variation for an inflow and the associated adjustment factor is shown next: coefficient of Variation - 0.25 0.26 - 0.50 0.51 -0.75 0.76 - 1.ee 1.01 - 1.25 Adjustment Factor 0.90 8.80 0.70 0.60 0.50 Assume a $200,000 project provides the following inflows with the associated coefficients of variation for each year. Coefficient of Year Inflow Variation $36,400 0.12 55,800 0.22 76,000 4 58,200 0.83 5 67,500 1.02 1 2 3 8.42 Use Arpendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Fill in the table below: (Do not round intermediate calculations. Round "Adjustment Factor" answers to 2 decimal places and other answers to the nearest whole dollar.) Year Adjustment Factor Adjusted Inflow 1 2 3 4 5 b-1. If the risk-free rate is 5 percent, compute the net present value of the adjusted inflows. (Negative amount should be indicated by a minus sign. Do not round Intermediate calculations and round your answer to 2 decimal places.) Net present value b-2. Should this project be accepted? Yes No