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

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