Compute the risk-adjusted npv of the project

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Reference no: EM131931357

Question: ABC Appliance Company uses the CAPM to determine its risk-adjusted discount rate, (RADR), for each of its projects:

Rj = RF + [b * (rm - RF)]

The company is currently interested in investing in the capital project shown below. The return on market is 9.65%, the risk-free rate is currently 8% and the project has a beta of 2.5.

Initial Investment

($3,900,000)

Year Cash Inflow

1 1,500,000

2 1,750,000

3 2,500,000

A. Using the CAPM compute the RADR

B. Compute the Risk-Adjusted NPV of the project.

Reference no: EM131931357

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