Problem #5 (8 points) You are considering two mutually exclusive projects & you want to use a risk adjusted rate (RADR) to help make your decision. Here is what we know 1. Cost of capital (call this the market return (Rm) in CAPM) is 12% 2. Risk free rate (Rf) is 7% Cash flows for each of your two projects are as follows Project Bunker Initial investment $200,000 Project Water hazard $300,000 Inflows Year 1 Year 2 Year 3 Year 4 Risk factor (b) $100,000 $ 75,000 $ 50,000 $100,000 0.8 $ 22,000 $ 98,000 $200,000 $195,000 1.2 1. Use a risk adjusted interest rate (RADR) to calculate the NPV of each project 2. Which project will you go forward with