Certainty Equivalents

Given the problem below, what is the CE NPV given the firms required return of 12%, the difference between the required return and the risk-free rate is 8% and the risk-free rate is 4%?

T EXPECTED CASH FLOW DEGREE OF RISK CE FACTOR CE CASH FLOW

0 -100,000 zero 1 -100,000

1 60,000 high .5

2 60,000 high .5

3 60,000 high .5

4 60,000 high .5

5 60,000 high .5

15 The CE NPV is a. $33,555 b. $19,781 c. $8,143 d. None