Using the following certainty equivalent coefficients

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Reference no: EM13985266

Use the following cash flows for the next 6 questions. (All answers should show up to 2 decimal points.)

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1. What is the NPV? (Use 10% as a discount rate and calculator) 

2. Compute the PI (Profitability index). (Use 10% as a discount rate and calculator) 

3. Compute IRR (Use calculator) 

4. Using the following certainty equivalent coefficients (CECs) and risk-free interest rate 6%, compute the certainty equivalent NPV (E(NPV)):CEC1 = 0.8, CEC2 = 0.8, CEC3 = 0.6, and CEC4 = 0.6.

5. Currently, the risk-free interest rate is 6% and the expected rate of return on the market portfolio is 14 percent. Assuming that beta of the project generating the above cash flows is 2, compute the expected NPV. (Use the RAD method).

6. Assuming the cost of capital is 16 percent compute the annualized net present value (the equivalent annualbenefit). 

Reference no: EM13985266

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Using the following certainty equivalent coefficients : Using the following certainty equivalent coefficients (CECs) and risk-free interest rate 6%, compute the certainty equivalent NPV (E(NPV)):CEC1 = 0.8, CEC2 = 0.8, CEC3 = 0.6, and CEC4 = 0.6.
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