Question: please answer all thanks P12-20 RISK-ADJUSTED DISCOUNT RATES: BASIC Country Wallpapers is considering investing in one of three mutually exclusive projects, E, F, and G.



P12-20 RISK-ADJUSTED DISCOUNT RATES: BASIC Country Wallpapers is considering investing in one of three mutually exclusive projects, E, F, and G. The firm's cost of capital, r, is 10%, and the riskfree rate, RF, is 2%. The firm has estimated each project's cash flow and each project's beta, as shown in the following table. a. Find the NPV of each project, using the firm's cost of capital. Which b. The firm uses the following equation to determine the riskadjusted discount rate, RADRj, for each project j : RADRj=RF+j(rmRF) Where RFBjRADRjrm=risk-freerate=betaofproject=risk-adjusteddiscountrateforprojectj=expectedreturnonmarketportfolio Substitute each project's beta into this equation to determine its RADR. c. Use the RADR for each project to determine its risk-adjusted NPV. Which project is preferable in this situation? each project j : RADRj=RF+j(rmRF) Where RFBjRADRjrm=risk-freerate=betaofproject=risk-adjusteddiscountrateforproject=expectedreturnonmarketportfolio Substitute each project's beta into this equation to determine its RADR. c. Use the RADR for each project to determine its risk-adjusted NPV. Which project is preferable in this situation? d. Compare and discuss your findings in parts a and c. Which project do you recommend that the firm accept
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