Given the Following Cash Flows and Certainty Equivalent Factors for an Investment

question 46

Multiple Choice

Given the following cash flows and certainty equivalent factors for an investment project, determine the certainty equivalent net present value. The firm's cost of capital is 14% and the risk-free rate is 6%. $$\begin{array} { l l l } & \text { Cash } & \text { Certainty-Equivalent } \\\text { Year } & \text { Flow } & \text { Factor } \\0 & - \$ 100,000 & 1.00 \\1 & \$ 60,000 & 0.90 \\2 & \$ 60,000 & 0.75 \\3 & \$ 60,000 & 0.55\end{array}$$

• A) $32,000
• B) $18,692
• C) $4,238
• D) Cannot be determined