Table 12.2 A Firm Is Considering Investment in a Capital Project Which

Multiple Choice

Table 12.2
A firm is considering investment in a capital project which is described below. The firm's cost of capital is 18 percent and the risk-free 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)
-The net present value without adjusting the discount rate for risk is ________. (See Table 12.2)

A) $336,000
B) $250,000
C) $179,400
D) $87,000