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Question: Hanson Auto Supply in the prior problem uses the risk-adjusted discount rate and relates the discount rate to the coefficient of variation as follows:

It will invest $120 and receive the expected value of cash flows you computed in problem 1of $40. Assume those cash flows of $40 will be earned for the next 5 years and are discounted back at the appropriate discount rate based on the coefficient of variation computed in problem 1. What is the net present value?

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Category:- Basic Finance
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