A Firm Is Considering Investment in a Capital Project Which $\text { Net Present Value }\quad\quad\quad\$1,000,000$

question 70

Multiple Choice

A firm is considering investment in a capital project which is described below. The firm's cost of capital is 18 percent and the riskfree rate is 6 percent. The project has a risk index of 1.5. The firm uses the following equation to determine the risk adjusted discount rate, RADR, for each project: RADR = Rf + Risk Index (Cost of capital - Rf)
$\text { Net Present Value }\quad\quad\quad\$1,000,000$
$\begin{array}{rrr}\text { Probability }&\text { Project A }&\text { Project B }\\0.25 & -\$ 5,000 & 0 \\0.50 & 4,000 & \$ 2,000 \\0.25 & 10,000 & 8,000\end{array}$
-The net present value without adjusting the discount rate for risk is _

• A) $179,400
• B) $250,000
• C) $336,000
• D) $87,000

---

Definitions:

Secondary Prevention

Efforts and interventions aimed at early detection and prompt treatment of disease or injury to prevent more severe problems developing.

Congestive Heart Failure

A chronic condition in which the heart is unable to pump blood effectively enough to meet the body's needs, leading to symptoms such as shortness of breath and swelling.

Situational-Background-Assessment-Recommendation (SBAR)

A communication framework used in healthcare to facilitate clear and effective communication among healthcare professionals.

Intensive Care Unit

A specialized hospital department equipped to provide intensive treatment and monitoring for critically ill or injured patients.