Billy Bob Is Considering Building a Water Slide Park That

question 4

Multiple Choice

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: $$\begin{array} { l l l } \text { Year } & \text { Net Cash Flows } & \text { Cert. Equiv. Factor } \\1 & \$ 120,000 & 0.90 \\2 & \$ 90,000 & 0.80 \\3 & \$ 60,000 & 0.65 \\4 & \$ 30,000 & 0.50 \\5 & \$ 10,000 & 0.30\end{array}$$ ? 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?

• A) $12,805
• B) $5,746
• C) $3,703
• D) $11,025

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Definitions:

Adenitis

Inflammation of lymph nodes or a gland.

Lymph Nodes

Small, bean-shaped structures that are part of the body's lymphatic system, crucial in filtering lymph and combating infections.

Tricuspid Valve

A valve in the human heart that lies between the right atrium and the right ventricle, regulating blood flow.

Right Atrium

The upper right chamber of the heart that receives deoxygenated blood from the body and pumps it to the right ventricle.