Question

In the ________________ method, expected cash flows are used in the valuation process, and the risk adjustment is made to the discount rate. Question 20 options: Certainty equivalent Risk-adjusted discount rate (RADR) Sensitivity analysis Scenario analysis

Answer #1

**Risk-Adjusted Discount Rate** because under
Risk-adjusted discount rate method, we use the expected cash flow
values, and the risk adjustment is made to the denominator of the
NPV equation

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Assume that the risk-free rate is 5%, the risk-adjusted discount
rate is 10%, the expected cash flow for t = 1 is 495, and
the expected cash flow for t = 2 is 508.2
a)Assume that the cash flow risk increases geometrically through
time. Compute the present value of the cash flow stream using the
certainty equivalent method.
b) Assume that the cash flow risk remains constant through time.
Compute the present value of the cash flow stream using the...

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Gordon Growth Model
NAV
All of the Above
Are AFFO numbers commonly found in the published financial
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Yes
No
The benefit of the discounted cash flow method in valuing a
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A relative number to be used...

When projects involve certain, or constant, cash flows, the
capital budgeting analysis that can be conducted is very simple and
straightforward. Unfortunately, this type of project rarely
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When a project’s cash flows, or the conditions that affect their
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A manager of “Safola Co. “ ask your advice to
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Risk Adjusted Discount Rate RADR
Equivalent Certainty Factor CF
Projects
A
B
C
Cost
100000
150000
200000
Expected of cash inflows
20000
25000
30000
Life( years)
7
9
10
Level of risk ( c.v)
0.24
0.34
0.18
Safola Co. usually uses the following discount rates
10%, 7%, 12%, and certainty factors 0.633,...

P12-12 (similar to) Risk-adjusted rates of return using
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risk-adjusted discount rate (RADR) in its analysis. Centennial's
managers believe that the appropriate market rate of return is 12.1
% , and they observe that the current risk-free rate of return is
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Initial investment (CF...

Accounting Management
A manager of your Company. ask your advice to evaluate 4
projects, consider the following information to determine the
project the manager should be select by the following
criteria’s:
1- Risk-Adjusted Discount Rate RADR
2- Equivalent Certainty Factor CF
Projects
A
B
C
Cost
100000
150000
200000
Expected of cash inflows
20000
25000
30000
Life( years)
7
9
10
Level of risk ( c.v)
0.24
0.34
0.18
company usually uses the following discount...

QUESTION THREE
Hezborn has the choice to accept a guaranteed $10 million cash
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A 50% chance of receiving $15.5 million
A 20% chance of receiving $4 million
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Assume the risk-adjusted rate of
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(show the workings)
Using...

Risk-adjusted rates of return using CAPM Centennial
Catering, Inc., is considering two mutually exclusive investments.
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(RADR) in its analysis. Centennial's managers believe that the
appropriate market rate of return is 12.1 %, and they observe that
the current risk-free rate of return is 6.5 %. Cash flows
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places.)
b. What is the certainty-equivalent cash flow
in year 1...

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