A Project Has an Expected Cash Flow of $300 in Year

question 45

Multiple Choice

A project has an expected cash flow of $300 in year 3. The risk-free rate is 5 percent, the market risk premium is 8 percent, and the project's beta is 1.25. Calculate the certainty equivalent cash flow for year 3, CEQ₃.

• A)$228.35
• B)$197.25
• C)$300.00
• D)$270.02

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Definitions:

Human Capital Investment

The process of increasing the value of a workforce through education, training, and health improvements.

Technologies

The application of scientific knowledge for practical purposes, especially in industry and everyday life.

Resource Endowments

The natural resources, capital, and human skills that a country or region possess, which can influence its economic development and trade patterns.

IACs

Industrialized Advanced Countries, a term sometimes used to refer to economically developed countries with high levels of industrialization.