Posted: July 7th, 2016

what is the present value of the cash flows?

Question 1
You deposit $8,000 into a retirement account at the end of the next 12 years earning 10% interest, what is the future value of your retirement after 12 years?

Question 2
You will receive $2,000 at the end of the next 12 years, assuming a 6% discount rate,

The initial investment in the project is $45,000. The firm’s cost of capital is 12%, however projects in this risk class have a 14% required rate of return. The risk-free rate is 8%.

Year Cash Inflow
1 $23,000
2 19,000
3 15,000
4 13,000
5 $10,000

1. Use CAPM to calculate the Risk Adjusted Discount Rate to use to evaluate this proposed project.

2. Calculate the Net Present Value of this project using the RADR calculated in Part 1.