A project costing $10,000 has a 12-year life and expected CF of $1,800 each year. The risk-free rate is 7%, the firm's cost of capital is 10% and the hurdle RADR applied to this project is 15%. The project's CE coefficients are presented below. Determine the project's NPV using the regular NPV method, the certainty equivalent (CE) method and the RADR method. Comparing the results. Should you accept the project?

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Comparing CE, RADR and NPV Methods 7% 10% 15% Risk-Free Rate Cost of Capital RADR Project Cost Project Life 10000 12 Year E(Rt) at 0 -10000 1 1 1800 0.92 2 1800 0.88 0.85 3 1800 4 1800 m 5 1800 6 1800 7 1800 8 1800 0.8 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 9 1800 10 1800 11 1800 12 1800 (12 points) A project costing $10,000 has a 12-year life and expected CF of $1,800 each year. The risk-free rate is 7%, the firm's cost of capital is 10% and the hurdle RADR applied to this project is 15%. The project's CE coefficients are presented below. Determine the project's NPV using the regular NPV method, the certainty equivalent (CE) method and the RADR method. Comparing the results. Should you accept the project? O O Comparing CE, RADR and NPV Methods 7% 10% 15% Risk-Free Rate Cost of Capital RADR Project Cost Project Life 10000 12 Year E(Rt) at 0 -10000 1 1 1800 0.92 2 1800 0.88 0.85 3 1800 4 1800 m 5 1800 6 1800 7 1800 8 1800 0.8 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 9 1800 10 1800 11 1800 12 1800 (12 points) A project costing $10,000 has a 12-year life and expected CF of $1,800 each year. The risk-free rate is 7%, the firm's cost of capital is 10% and the hurdle RADR applied to this project is 15%. The project's CE coefficients are presented below. Determine the project's NPV using the regular NPV method, the certainty equivalent (CE) method and the RADR method. Comparing the results. Should you accept the project? O O

Answer rating: 100% (QA)

To determine the projects NPV using different methods lets calculate the net present value NPV using the regular NPV method the certainty equivalent C... View the full answer