Question: Rihanna Corporation is considering two mutually exclusive projects. The expected values for each project's cash flows are as follows: Year Project A (USD) Project

Rihanna Corporation is considering two mutually exclusive projects. The expected values for

Rihanna Corporation is considering two mutually exclusive projects. The expected values for each project's cash flows are as follows: Year Project A (USD) Project B (USD) 0 -300,000 -300,000 1 100,000 200,000 2 200,000 200,000 3 200,000 200,000 4 300,000 300,000 5 300,000 400,000 The company has decided to evaluate these projects using the certainty equivalent method. The certainty equivalent coefficients for each project's cash flows are as follows: Year Project A Project B 0 1.00 1.00 1 0.95 0.90 2 0.90 0.80 3 0.85 0.70 4 0.80 0.60 5 0.75 0.50 Given that this company's normal required rate of return is 15 percent and the after-tax risk free rate is 8%, which project should be selected?

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