(?Risk-adjusted NPV?) The Hokie Corporation is considering two mutually exclusive projects. Both require an initial outlay...

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(?Risk-adjusted NPV?) The Hokie Corporation is considering twomutually exclusive projects. Both require an initial outlay of?$13,000 and will operate for 9 years. Project A will produceexpected cash flows of ?$5,000 per year for years 1 through 9?,whereas project B will produce expected cash flows of ?$6,000 peryear for years 1 through 9. Because project B is the riskier of thetwo? projects, the management of Hokie Corporation has decided toapply a required rate of return of 15 percent to its evaluation butonly a required rate of return 9 percent to project A. Determineeach? project's risk-adjusted net present value.
What is the? risk-adjusted NPV of project? A?
?$???(Round to the nearest? cent.)
What is the? risk-adjusted NPV of project? B?
?$??(Round to the nearest? cent.)

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3.9 Ratings (516 Votes)

The riskadjusted NPV of PROJECTA Year Annual Cash Flow Present Value factor at 9 Present Value of Cash Flow 1 5000 0917431 458716 2 5000 0841680 420840 3 5000 0772183 386092 4 5000 0708425 See Answer

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(?Risk-adjusted NPV?) The Hokie Corporation is considering twomutually exclusive projects. Both require an initial outlay of?$13,000 and will operate for 9 years. Project A will produceexpected cash flows of ?$5,000 per year for years 1 through 9?,whereas project B will produce expected cash flows of ?$6,000 peryear for years 1 through 9. Because project B is the riskier of thetwo? projects, the management of Hokie Corporation has decided toapply a required rate of return of 15 percent to its evaluation butonly a required rate of return 9 percent to project A. Determineeach? project's risk-adjusted net present value.What is the? risk-adjusted NPV of project? A??$______???(Round to the nearest? cent.)What is the? risk-adjusted NPV of project? B??$______??(Round to the nearest? cent.)