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:
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

Question

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: 
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

Quizplus · Accepted Answer

Solution:
 11ea10f6_a153_46b3_b6b3_616553ee794e_TB2040_00

Billy Bob Is Considering Building a Water Slide Park That