corporate finance

Example 11 (Certainty Equivalent) Project A, whose expected net cash flows are shown in Table below, is to be evaluated using the certainty equivalent method. Assume that the initial net cost of Tshs 20,000,000 is fixed by contract and hence known with certainty. End of 0 2 4 Year Initial (20,000,000) 11,500,000 12,000,000 11,000,000 12,000,000 11,600,000 Outlay Moreover, that the capital budgeting analyst estimates that the cash inflows in Years 1 through 5 all have average risk, and that the appropriate certainty equivalent is Tshs 8,000,000. Required; Compute adjusted NPV for the project