A project has a forecasted cash flow of $110 in year 1 and $121 in year 2. Risk free rate is 5%, the estimated risk premium on the market is 10%, and the project has a beta of 0.7. If you use a constant risk-adjusted discount rate, what is
a)The PV of theproject?
b)The certainty-equivalent cash flow in year 1 and year2?
c)The ratio of the certainty-equivalent cash flows to the expected cash flows in years 1 and2?

we know that

applying the law of sines

°

so

∠j=18°

∠k=29°

∠l=180-(18+29)=133°

the answer part a) is

the measure of angle k is  ≈29°

part b)  the measure of angle k could also be

(180-29)=151°

so

∠j=18°

∠k=151°

∠l=180-(18+151)=11°

the answer part b) is

the measure of angle k could also be 151°

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the expression (1.26)2t reveals the approximate rate of increases in the number of plants semiannually.

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