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(Risk-adjusted discount rates and risk classes) The G. Wolfe Corporation is examining two capital-budgeting projects with 5-year lives. The first, project A, is a replacement
(Risk-adjusted discount rates and risk classes) The G. Wolfe Corporation is examining two capital-budgeting projects with 5-year lives. The first, project A, is a replacement project; the second, project B, is a project unrelated to current operations. The G. Wolfe Corporation uses the risk-adjusted discount rate method and groups projects according to purpose, and then it uses a required rate of return or discount rate that has been preassigned to that purpose or risk class. The expected cash flows for these projects are given in the popup window, B. The purpose/risk classes and preassigned required rates of return are shown in the popup window, Determine each project's risk-adjusted net present value. Data Table Data Table - X (Click on the following icon in order to copy its contents into a spreadsheet.) (Click on the following icon in order to copy its contents into a spreadsheet.) REQUIRED RATE OF RETURN 11% 15% 17% PROJECT A - $200,000 PURPOSE Replacement decision Modification or expansion of existing product line Project unrelated to current operations Research and development operations PROJECT B - $320,000 20% Initial investment Cash inflows: Year 1 Year 2 Year 3 Year 4 Year 5 $120,000 30,000 40,000 70,000 100.000 $130,000 130,000 130,000 130.000 130,000 Print Done Print Done What is the risk-adjusted NPV of project A? $ 97,726.09 (Round to the nearest cent.) What is the risk-adjusted NPV of project B? $ 108,068.88 (Round to the nearest cent.)
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