Question

In: Accounting

A manager of “Safola Co. “ ask your advice to evaluate 4 projects, consider the following...

A manager of “Safola Co. “ 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

Safola Co. usually uses the following discount rates 10%, 7%, 12%, and certainty factors 0.633, 0.742, 0.543.

please Answer with full details .

Solutions

Expert Solution

. Projects A B C
a Cost $ (100,000.00) $ (150,000.00) $ (200,000.00)
b Expected Cash inflow $      20,000.00 $      25,000.00 $      30,000.00
c Certainity factor 0.633 0.742 0.543
d Riskless cash inflow (b x c) $      12,660.00 $      18,550.00 $      16,290.00
e Dscount rate 10% 7% 12%
f PV annuity factor 4.8684 6.5152 5.6502
g PV of Cash flows (d x f) $      61,633.94 $    120,856.96 $      92,041.76
h NPV (a - g) $    (38,366.06) $    (29,143.04) $ (107,958.24)

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