Assume a project costs Kshs 30,000 and yields the following uncertain cash flows and also that the certainty equivalent coefficients have been estimated as follows The risk-free discount rate is given as

13%:

Year Cash flow Certainty Equivalents

 

1                15,000                 0.88

 

2               18,000                  0.81

 

3               12,000                   0.45

 

4                8,000                    0.30

 

Required: Compute the expected NPV of the project and make a comment on your findings.

Answer rating: 100% (QA)

To compute the expected NPV Net Present Value of the project we need to discount each cash flow by i... View the full answer