This topic contains a solution. Click here to go to the answer

Author Question: You are given risky cash flow data for a three-year project: Year Cash flow 1 2,000 2 3,000 3 ... (Read 93 times)

karen

  • Hero Member
  • *****
  • Posts: 537
You are given risky cash flow data for a three-year project:
 
  Year Cash flow
  1 2,000
  2 3,000
  3 4,000
 
  The initial cash outflow is 6,000; the risk-free interest rate is 6, and the risk-adjusted discount rate is 10.
 
  Calculate the NPV by both the risk-adjusted discount rate method and the certainty equivalent method in such a way that the NPV will be the same using either method.

Question 2

The supply for products that exhibit cost externalities is generally ________ the supply for products that do not.
 
  A) greater than
  B) less than
  C) the same as
  D) greater or less (depending on the market) than



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

Anonymous

  • Sr. Member
  • ****
  • Posts: 317
Answer to Question 1

Riskless Risky
Cash Flow Cash Flow
CE Riskless Discounted Discounted
Year Cash Flow Factor Cash Flow at 6 at 10
1 2000 0.963636 1927 1818 1818
2 3000 0.928595 2786 2479 2479
3 4000 0.894828 3579 3005 3005

Total 7303 7303
Less initial investment 6000 6000
NPV 1303 1303

CE factors:
1.06/1.1 = 0.963636
1.062/1.12 = 0.928595
1.063/1.13 = 0.894828

Answer to Question 2

A




karen

  • Member
  • Posts: 537
Reply 2 on: Jul 1, 2018
:D TYSM


mcarey591

  • Member
  • Posts: 365
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

 

Did you know?

The first oral chemotherapy drug for colon cancer was approved by FDA in 2001.

Did you know?

More than 20 million Americans cite use of marijuana within the past 30 days, according to the National Survey on Drug Use and Health (NSDUH). More than 8 million admit to using it almost every day.

Did you know?

Each year in the United States, there are approximately six million pregnancies. This means that at any one time, about 4% of women in the United States are pregnant.

Did you know?

Recent studies have shown that the number of medication errors increases in relation to the number of orders that are verified per pharmacist, per work shift.

Did you know?

You should not take more than 1,000 mg of vitamin E per day. Doses above this amount increase the risk of bleeding problems that can lead to a stroke.

For a complete list of videos, visit our video library