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Project Alpha offers the following net cash flows following an initial (year 0), certain outlay (NINV) of $70,000:

Year

Net Cash Flow

Certainty Equivalent Factor

1

$30,000

0.91

2

30,000

0.79

3

30,000

0.65

4

20,000

0.52

5

20,000

0.40

6

10,000

0.30

a. Compute the NPV of this project at a 17 percent cost of capital.

b. If the risk-free rate is 8 percent, what is the certainty equivalent NPV for project Alpha?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92090907

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