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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

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
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
Section: Chapter Questions
Problem 1PS
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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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