Billy Bob is considering building a water slide park that will require a net investment of $200,000 and yield the following net cash flows: Year Net Cash Flows Cert. Equiv. Factor 1 $120,000 0.90 2 $90,000 0.80 3 $60,000 0.65 4 $30,000 0.50 5 $10,000 0.30 If the risk-free rate is 8 percent and the market risk premium is 6 percent, what is the certainty equivalent NPV for this project?
Billy Bob is considering building a water slide park that will require a net investment of $200,000 and yield the
following net cash flows:
Year Net Cash Flows Cert. Equiv. Factor
1 $120,000 0.90
2 $90,000 0.80
3 $60,000 0.65
4 $30,000 0.50
5 $10,000 0.30
If the risk-free rate is 8 percent and the market risk premium is 6 percent, what is the certainty equivalent NPV for this project?
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