Question
The firm uses the following equation to determine the risk-adjusted discount rate, RADR j , for each project j : RADR j = R F
The firm uses the following equation to determine the risk-adjusted discount rate, RADRj, for each project j:
RADRj = RF + RIj x (r - RF)
where RF = risk-free rate of return, RIj = risk index for project j, and r = cost of capital.
Use the RADR for each project to determine its risk-adjusted NPV. (Hint: Make sure to enter negative signs where appropriate).
What is the risk-adjusted net present value for project E? (Round to two decimal places, and do not include '$' sign in your answer.)
What is the risk-adjusted net present value for project F? (Round to two decimal places, and do not include '$' sign in your answer.)
What is the risk-adjusted net present value for project G? (Round to two decimal places, and do not include '$' sign in your answer.)
Country Wallpapers is considering investing in one of three mutually exclusive projects, E,F, and G. The firm's cost of capital, r, is 15.4%, and the risk-free rate, RF, is 9.6%. The firm has gathered the following basic cash flow and risk index data for each projectStep by Step Solution
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