Patek Philippe & Co. is attempting to select one of three mutually exclusive projects for the redesign of its classic watches: Nautilius, Grand Complications, and Calatrava. Although all the projects have 5-year lives, they possess differing degrees of risk. Project Nautilius has the highest risk and is in class V; project Grand Complications is in class II, the below-average-risk class; and project Calatrava is in class III, the average-risk class. The basic cash flow data for each project and the risk classes and risk-adjusted discount rates (RADRs) used by the firm are shown in the following tables.

a. Find the risk-adjusted NPV for each project.

b. Which project, if any, would you recommend that the firm undertake?

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Initial investment (CFO) Year (t) 1 2 3 4 5 Risk class I II III Nautilius -180,000 80,000 70,000 60,000 60,000 60,000 Grand Complications - 235,000 Cash inflows (CF,) Description Lowest risk Below-average risk Average risk Above-average risk Highest risk 50,000 60,000 70,000 Risk Classes and RADRs 80,000 90,000 Risk-adjusted discount rate (RADR) 8% 13 15 Calatrava - 310,000 20 22 90,000 90,000 90,000 90,000 90,000