Silver Sun Entertainment has a weighted-average cost of capital of 8.22 percent and is evaluating two...

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Silver Sun Entertainment has a weighted-average cost of capitalof 8.22 percent and is evaluating two projects: A and B. Project Ainvolves an initial investment of 5,756 dollars and an expectedcash flow of 8,519 dollars in 6 years. Project A is considered morerisky than an average-risk project at Silver Sun Entertainment,such that the appropriate discount rate for it is 0.86 percentagepoints different than the discount rate used for an average-riskproject at Silver Sun Entertainment. The internal rate of returnfor project A is 6.75 percent. Project B involves an initialinvestment of 4,760 dollars and an expected cash flow of 8,425dollars in 5 years. Project B is considered less risky than anaverage-risk project at Silver Sun Entertainment, such that theappropriate discount rate for it is 1.78 percentage pointsdifferent than the discount rate used for an average-risk projectat Silver Sun Entertainment. The internal rate of return forproject B is 12.1 percent. What is X if X equals the NPV of projectA plus the NPV of project B?

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Calculation of NPV Net Present Value of Project A Initial Investment 5756 Expected Cash flow in 6 years 8519 Discounted rate is 086 percentage points different than average risk project and as the project is considered riskier than average See Answer

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Silver Sun Entertainment has a weighted-average cost of capitalof 8.22 percent and is evaluating two projects: A and B. Project Ainvolves an initial investment of 5,756 dollars and an expectedcash flow of 8,519 dollars in 6 years. Project A is considered morerisky than an average-risk project at Silver Sun Entertainment,such that the appropriate discount rate for it is 0.86 percentagepoints different than the discount rate used for an average-riskproject at Silver Sun Entertainment. The internal rate of returnfor project A is 6.75 percent. Project B involves an initialinvestment of 4,760 dollars and an expected cash flow of 8,425dollars in 5 years. Project B is considered less risky than anaverage-risk project at Silver Sun Entertainment, such that theappropriate discount rate for it is 1.78 percentage pointsdifferent than the discount rate used for an average-risk projectat Silver Sun Entertainment. The internal rate of return forproject B is 12.1 percent. What is X if X equals the NPV of projectA plus the NPV of project B?