Rolling in Dough Cookie Corporation is trying to determine its certainty equivalent NPV.What is the CNPV if the risk free rate is 2% and the initial investment is $19,000 (rounded)?

A) $2,575.25
B) $6,655.10
C) $5,261.38
D) $4,215.15

Question

Rolling in Dough Cookie Corporation is trying to determine its certainty equivalent NPV.What is the CNPV if the risk free rate is 2% and the initial investment is $19,000 (rounded)?

A) $2,575.25 
B) $6,655.10 
C) $5,261.38 
D) $4,215.15

Quizplus · Accepted Answer

Solution using calculator accuracy:
 $$\begin{array} { | c | c | c | } 
\hline \text { Cash Flowr } & \text { Certainty Eqquivalents } & \text { Certain Cash Flowr } \
\hline 15,000 & .9 & 13,500 \
\hline 15,000 & .6 & 9,000 \
\hline 8,000 & .5 & 4,000 \
\hline
\end{array}$$ 
CNPV = $6,655.10
CF₀ = -19,000
CF₁ = 13,500
CF₂ = 9,000
CF₃ = 4,000
I/Yr = 2

Rolling in Dough Cookie Corporation Is Trying to Determine Its