Risk classes and RADR Moses Manufacturing is attempting to select the best of three mutually exclusive projects, X, Y, and Z. Although all the projects have 5-year lives, they possess differing degrees of risk. Project X is the most risky; Project Y is in the least risky; and Project Z is in between. The basic cash flow data for each project and the risk-adjusted discount rates (RADRS) used by the firm are shown in the following table a. Find the risk-adjusted NPV for each project. b. Which project, if any, would you recommend that the firm undertake? Data table X a. The net present value for project X is $. (Round to the nearest cent.) (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) RADR Initial investment (CFO) Year (t) Project X 22.5% $178,000 Project Y 13.7% Project Z $235,000 15.5% $308,000 Cash inflows (CF) 1 $82,000 $55,000 $94,000 2 75,000 66,000 94,000 3 58,000 73,000 94,000 4 57,000 85,000 94,000 5 59,000 99,000 94,000 Print Done

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Risk classes and RADR Moses Manufacturing is attempting to select the best of three mutually exclusive projects, X, Y, and Z. Although all the projects have 5-year lives, they possess
differing degrees of risk. Project X is the most risky; Project Y is in the least risky; and Project Z is in between. The basic cash flow data for each project and the risk-adjusted discount
rates (RADRS) used by the firm are shown in the following table
a. Find the risk-adjusted NPV for each project.
b. Which project, if any, would you recommend that the firm undertake?
Data table
X
a. The net present value for project X is $. (Round to the nearest cent.)
(Click on the icon here in order to copy the contents of the data table below into
a spreadsheet.)
RADR
Initial investment (CFO)
Year (t)
Project X
22.5%
$178,000
Project Y
13.7%
Project Z
$235,000
15.5%
$308,000
Cash inflows (CF)
1
$82,000
$55,000
$94,000
2
75,000
66,000
94,000
3
58,000
73,000
94,000
4
57,000
85,000
94,000
5
59,000
99,000
94,000
Print
Done
Transcribed Image Text:Risk classes and RADR Moses Manufacturing is attempting to select the best of three mutually exclusive projects, X, Y, and Z. Although all the projects have 5-year lives, they possess differing degrees of risk. Project X is the most risky; Project Y is in the least risky; and Project Z is in between. The basic cash flow data for each project and the risk-adjusted discount rates (RADRS) used by the firm are shown in the following table a. Find the risk-adjusted NPV for each project. b. Which project, if any, would you recommend that the firm undertake? Data table X a. The net present value for project X is $. (Round to the nearest cent.) (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) RADR Initial investment (CFO) Year (t) Project X 22.5% $178,000 Project Y 13.7% Project Z $235,000 15.5% $308,000 Cash inflows (CF) 1 $82,000 $55,000 $94,000 2 75,000 66,000 94,000 3 58,000 73,000 94,000 4 57,000 85,000 94,000 5 59,000 99,000 94,000 Print Done
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