## Q. 3.PP.40

Determine the risk-adjusted NPV of the following projects, whose relevant data are given below.
The company selects the risk-adjusted rate of discount on the basis of the coefficient of variation.

 $C$ $B$ $A$ $Projects$ 2,10,000 1,20,000 1,00,000 Net cash outlays (Rs) 5 5 5 Project life (years) 70,000 42,000 30,000 Annual cash inflow 0.12 0.8 0.4 Coefficient of variation
 $Risk-adjusted\>rate\>of\>discount$ $Coefficient\>of\>variation$ 10 0 12 0.4 14 0.8 16 1.2 18 1.6 22 2 25 More than    2

## Verified Solution

$Determination \>of\> expected \>NPV$
 $NPV$ $Cash\>outlays$ $Total\>PV$ $PV\>factor$ $Risk-adjusted$ $rate\>of\>discount$ $CFAT$ $Project$ Rs 8,150 Rs 1,00,000 Rs 1,08,150 3.605 12 Rs 30,000 A 24,186 1,20,000 1,44,186 3.433 14 42,000 B 19,180 2,10,000 2,29,180 3.274 16 70,000 C