What is the certainty equivalent

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Reference no: EM13925389

Project Alpha offers the following net cash flows following an initial (year 0) certain outlay (NINV) of $70,000: Year Net cash flows 1 $30,000 2 $30,000 3 $30,000 4 $20,000 5 $20,000 6 $10,000 Year -Certainty Equivalent Factor 1- 0.91 2- 0.79 3- 0.65 4- 0.52 5- 0.40 6- 0.30 a. Compute the NPV of this project at a 17 percent cost of capital. b. If the risk free rate is 8 percent, what is the certainty equivalent NPV for Project Alpha?

Reference no: EM13925389

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