A business is considering an investment in one of two mutually exclusive projects. The discount rate used for Project A is 12%. Futher, Project A cost 15K and it would be depreciated using MACRS. It is expected to have an after-tax salvage value of 5K at the end of 6 years and to produce after-tax cash flows (including a depreciation) of 4K for each of the 6 years.
Project B costs 14,815 and would also be depreciated using MACRS. B is expected to have a zero salvage value at the end of its 6-year life and to produce after-tax cash flows (including depreciation) of $5,100 each year for 6 years. The companys marginal tax rate is 40%. What risk-adjusted discount rate will equate the NPV of project B to that of Project A
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A business is considering an investment in one of two mutually exclusive projects. The discount rate used for Project A is 12%. Futher, Project A cost 15K and it would be depreciated using ...
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This explains the Risk adjusted discount rate will equate the NPV or both projects
... provides for a basis of calculating the risk-adjusted discount rate. ... there exists a category of risk seekers who do ... demand premium for assuming risks; they are ...
... substracts 3 percentage points to adjust for project ... The appropiate risk adjusted discount rate that should be used ... first, but it correctlky adjusts for risk...
Risk-adjusted discount rates. ... in one of the three mutually exclusive projects E, F, G. The firms cost of capital, r, is 15% and the risk-free rate, Rf, is ...
... 10.15) (Risk-adjusted discount rates and risk classes) The G. Wolfe Corporation is ... The G. Wolfe Corporation uses the risk-adjusted discount rate method and ...
... uses a required rate of return or discount rate that has ... are as follows: PURPOSE REQUIRED RATE OF RETURN ... 20 Determine each project's risk-adjusted net present ...
... they are willing to pay a premium to take risks. ... steps to calculate the Scenario analysis and risk-adjusted NPV. ... a WACC of 8 percent, and high-risk projects are ...
... for assuming risks; they are willing to pay a premium to take risks. ... On the other hand, the risk-adjusted discount rate adjusts for risk by adjusting the ...
... the risk-adjusted discount rate to be used may be say 12%, arrived as 10% plus 2% risk factor. By using the respective risk adjusted discount rates, the two ...
... So, you can adjust the cash flows for the ... in the model and change the discount rate to reflect ... blogspot.com/2010/07/214-risk-adjusted-discount-rate.html http ...
