Using the following certainty equivalent coefficients (CECs) and risk-free interest rate 6%, compute the certainty equivalent NPV (E(NPV)): CEC1 = 0.8, CEC2 = 0.8, CEC3 = 0.6,and CEC4 = 0.6.
Currently, the risk-free interest rate is 6% and the expected rate of return on the market portfolio is 14 percent. Assuming that beta of the project generating the above cash flows is 2, compute the expected NPV. (Use the RAD method).
Assuming the cost of capital is 16 percent, evaluate the annualized net present value (the equivalent annual benefit).